Combatting Offshore Tax Evasion After Brexit EmilDuvessa SondajBandeen, Han Juliette Bowen, Mark O’Brien, Will Melling and Zeki Dolen Emil Sondaj Hansen,
Hence, FFIs and individuals will be more willing to comply for the lesser benefits of UK access. Moreover, the UK could provide an additional incentive for compliance by foreign governments in the form of reciprocity – a feature notably lacking from the US’s legislation.270 This proposal could, however, distract from the larger goal of achieving a more comprehensive solution to the problem of tax evasion.
There are other reasons why FATCA provides a poor model for a UK scheme to curb offshore tax evasion. First, once the Brexit transition period ends, the UK will be a regulatory competitor to the EU; this makes it less likely that either party will wish to cooperate on tax rules unless there is a good chance of mutual benefits. Second, the viability of a more reciprocal agreement depends on the final relationship reached between the UK and EU, which at present, is still highly uncertain. More broadly, UK foreign policy is currently in a transformational phase as Britain reimagines the role it should play in global affairs. It may be some time before the country is sure that a venture like FATCA, and all the implications for foreign relations that it would involve, satisfies its new foreign policy aims.
Taking these considerations into account, we cannot recommend, at present, that the UK pursues a FATCA-style venture to curb offshore tax evasion. As a piece of legislation which does provide a proven practical template however, policymakers should keep an open mind on whether a ‘British FATCA’ would be appropriate in the years to come. At present, the UK would be better off pursuing, at the international level, a tax compliance scheme that is more comprehensive and reciprocal than FATCA. We therefore recommend that British efforts are more effective if targeted at the multilateral and international level.
V.II MULTILATERAL RECOMMENDATIONS
i. Pressure on the US to Reciprocate Automatic Exchange of Information
270
L. Hakelberg, ‘Coercion in International Tax Cooperation: Identifying the Prerequisites for Sanction Threats by a Great Power’ Review of International Political Economy 23, 511-541.
The Wilberforce Society Cambridge, UK
www.thewilberforcesociety.co.uk
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February 2021
