The practice of funnelling money to tax-free or low-tax countries such as Switzerland in order to avoid paying more punitive taxes at home is finished, the head of French bank Societe Generale (“SocGen”) said last month.
Governments and regulators across the world have cracked down on tax evasion in the wake of the financial crisis, a drive which has seen the US and Europe heap pressure on Switzerland, Liechtenstein, Monaco and others to surrender more information.
“With all the reforms today that have been done by various governments, tax havens - that is to say people with secret bank accounts hidden somewhere to avoid the tax authorities - in my view, that is over,” SocGen Chief Executive Frederic Oudea told French television channel BFM.
Citing the example of Switzerland, he said: "What is happening right now means that nobody will take that kind of risk anymore."
Swiss banks publicly apologised in September for their role in helping tax cheats, following a landmark settlement with US authorities that would allow lenders to come forward over tax evasion by US customers and avert prosecution by paying a fine.
The crackdown has effectively meant that an incoming US law requiring foreign banks to surrender information on US account holders has become unnecessary, Oudea added. The Foreign Account Tax Compliance Act, or FATCA, was enacted in 2010 but takes effect in July 2014. It requires foreign financial institutions to tell the US tax authorities about Americans' offshore accounts worth more than US$50,000 (HK$388,000).
However, the head of UK advocacy group Tax Justice Network, John Christensen, said the idea that the days of tax havens were over at this stage “remains entirely wishful thinking”.
“The use of secret bank accounts is rapidly being superseded by using offshore trusts and secret foundations,” he said.
“We're also seeing a wider number of jurisdictions, with Hong Kong, Singapore, Mauritius very rapidly gaining market share, and that is partly a reflection of what's happening as wealth concentrates in the Far East."
- Reuters News