Global Data-Sharing Accord Expands Push to Find Tax Cheat

Governments around the world closed in on tax evaders with an automatic data-sharing accord that broadens efforts by the U.S. and the five biggest European Union economies to more than 50 countries and territories.

Finance ministers signed the agreement in Berlin today in a signal of global determination to capture tax revenue, after the U.S. pursued banks such as Credit Suisse Group AG (CSGN) for helping Americans cheat on their taxes and German authorities bought CDs containing stolen bank data.

“Tax evasion is a scourge across the world and can only be tackled with a global solution,” U.K. Chancellor of the Exchequer George Osborne said at a news conference with his counterparts from Germany, France, Italy and Spain. “We expect this will provide tax authorities across the world with the details of billions of pounds of assets held overseas.”

The pledges mark the biggest step yet in the global effort spurred by the financial crisis in 2009 to identify undeclared funds hidden from government coffers. All major financial centers committed to start exchanging data by 2018 and holdouts are being urged to join, according to a joint statement e-mailed by the German Finance Ministry.

It’s really the beginning of the end” of bank secrecy, Pascal Saint-Amans, head of the Organization for Economic Cooperation and Development’s center for tax policy and administration, said in a phone interview yesterday.

While the Paris-based OECD doesn’t have a global estimate of undeclared funds, voluntary disclosure initiatives by 20 countries have generated 37 billion euros ($47 billion) in revenue since 2009, Saint-Amans said.

U.S. Pressure

Although the U.S. isn’t a signatory to the standard, the template for automatic exchange is the 2010 U.S. Foreign Account Tax Compliance Act, which tightens reporting requirements for non-U.S. financial accounts.

The five biggest EU economies — Germany, France, the U.K., Italy and Spain — agreed last year to exchange data among themselves along the lines of FATCA.

“We want to say that tax evasion will no longer be pay,” German Finance Minister Wolfgang Schaeuble said at the news conference. “It’s about fairness” and “in this globalized world we need new global standards,” he said.

Joining today’s pledge to automatically exchange data collected by financial institutions are most EU countries, Liechtenstein, Mexico, Argentina, South Korea and jurisdictions such as Bermuda, the Cayman Islands and the Isle of Man.

Seeking Switzerland

More than 40 countries have agreed to adopt the standard starting in 2017. Others, including Switzerland, Brazil, Canada, China, Hong Kong, Monaco and Russia, have committed to start in 2018, according to OECD documents.

While Switzerland isn’t an early adopter, its government has a mandate to negotiate with the EU. Ministers expressed confidence that the Swiss will join.

The global crackdown has been illustrated by the U.S. government’s pursuit of Swiss banks, including a $2.6 billion fine in May against Credit Suisse after its main subsidiary admitted helping Americans cheat the Internal Revenue Service.

More than 100 Swiss banks seeking to avoid U.S. prosecution asked the Justice Department on Oct. 21 to back off a dozen demands, including that they cooperate with other nations. The demands were part of a disclosure program tied to a proposed non-prosecution agreement signed on to by about a third of Swiss banks in a bid to avoid the six-year IRS crackdown.

The OECD and partner countries are also working on plans for a global exchange of information to combat tax-avoidance strategies used by companies such as Google Inc. (GOOG), Apple Inc. and Yahoo! Inc. Multinational companies hold an estimated $2 trillion in low-tax jurisdictions, OECD Secretary-General Angel Gurria has said.

Unfinished Work

Germany, where Chancellor Angela Merkel is seeking to balance the federal budget next year for the first time since 1969, has helped lead the push against bank secrecy, prompting discord with Switzerland, which isn’t an EU member and refused to help Germany in tax probes. Prominent German cases such as former Bayern Munich soccer club president Uli Hoeness focused public attention on tax evasion.

“This will greatly enhance the ability of governments to clamp down on tax evaders,” Osborne said. “Of course the work is not finished. We’ve got to go on pursuing those who would hide their assets from taxation.”