Australia has signed up to Europe’s multilateral tax information exchange scheme that uses the US Foreign Account Tax Compliance Act (FATCA) as its blueprint.
The scheme introduced by the UK, France, Germany, Italy and Spain in April calls for each participating country's tax authority to collect information on financial accounts owned by foreign investors, including presumably a foreign limited partner's interest in a private equity fund. Participating countries would then share that information on a reciprocal basis.
The tax agreement was signed by Australian Treasurer, Chris Bowen, who said in a statement: “This continues Australia's strong commitment and leadership in promoting better exchange of information to help ensure the integrity of the international tax system.”
The statement said Australia will continue to make tax avoidance a priority at the G20, which it will preside over next year. Earlier this year, G8 countries (a more exclusive club of rich nations) held a summit in the UK vowing to clamp down on money laundering, tax evasion and corporate tax avoidance. PE Manager reported that the summit hinted at the possible creation of a global FATCA-like system of tax information exchange, which if achieved would be a daunting compliance burden for fund managers.
However some market sources believe a global FATCA-like arrangement would be too complex to create. One source speaking to PEM said the plan would require an international body such as the Organization for Economic Co-operation and Development (which has the ear of tax agencies around the globe) for it to work.
Aside from the US, the UK has been the most vocal country regarding tax exchange agreements. Late last year, UK Treasury reached out to some of the UK’s neighboring offshore jurisdictions, including Jersey and Guernsey, to set-up a tax exchange framework.
The UK's International Development Committee (IDC) also floated the idea of a global tax information exchange network last summer. The committee recommended the UK government: “…introduce legislation similar to the relevant section of the US FATCA, requiring tax authorities automatically to exchange information relating to UK citizens or corporations”.