Updated on April 12, 2016:
Like many other politicians the German Federal Minister of Finance (Dr. Wolfgang Schäubele) wants to use the upset caused by the Panama Papers to push forward on the chosen path to combat tax avoidance, tax evasion and money laundering (the introduction of the Automatic Exchange of Financial Account Information in Tax Matters and the OECD’s BEPS project). In this respect on April 11, 2016 a 10-step plan for a fairer international tax system and a more effective fight against money laundering was published on the website of the German Federal Ministry of Finance.
Since we feel the 10-step plan is also interesting for tax specialists from other jurisdictions, below we did our best to translate and somewhat summarize the 10 steps mentioned in the plan.
The plan consists out of the following 10 steps:
1. Panama has to cooperate. Panama has to possibly quickly join the group of countries automatically exchanging information in tax matters. Furthermore Panama has to change its company law in such a way that inactive companies and companies lacking substance as well as their shareholders can be identified. In this respect the German Minister of Finance calls on the OECD to develop criteria to identify inactive companies and companies lacking substance. According to the German Minister one should be able to differentiate between harmless empty shell companies and so-called letter-box companies. The German Minister of Finance threatens Panama that if it does not quickly become cooperative, Germany will advocate to internationally out-law certain financial activities carried out in Panama;
2. The various national and international “black lists” have to be standardized/harmonized. For this uniform criteria relating to tax and money laundering aspects are needed. The leadership for this should be laying with an international organization like the OECD;
3. One hundred states/jurisdictions is not enough. If possible it should be arranged that worldwide all states/jurisdictions and areas implement the new standard for the automatic exchange of information in tax matters;
4. A monitoring mechanism for the automatic exchange of information is needed. According to the German Minister of Finance the Global Forum on Transparency and Exchange of Information for Tax Purposes should monitor the consistent implementation of the new standard for the automatic exchange of information in tax matters. The Global Forum should also develop effective sanctions that can be imposed on negligent and non-cooperative states/jurisdictions. The German Minister is also of the opinion that the new standard should not only apply to new accounts, but that it should also apply to existing accounts;
5. A global register of beneficial owners of companies is needed to make it more transparent who is ultimately behind corporate structures. At the same time company law requirements should be designed in such a way that they make it easy to identify the beneficial owners of companies;
6. The national (anti-money laundering)registers should globally be systematically linked. This would include the speedy development of a uniform standard for which information should be included in these national registers and how these registers are to be verified. In addition the tax administrations need to have access to these registers so that the information included in these registers can be compared with the information obtained via the international automatic exchange of information. The registers should also be open to appropriate specialized NGOs and specialized journalists. In return these journalists and NGOs are then expected to share the outcomes of their investigations with the authorities;
7. It is not the job of banks to facilitate tax avoidance. Facilitating tax evasion is already criminally punishable. The BEPS Action Plan already envisages disclosure obligations for promoters of tax saving schemes. The German Ministry of Finance states that it will ensure that in the future banks and advisors will no longer want to take the legal risks of promoting and offering such (tax saving) schemes.
8. Tougher administrative sanctions for companies are needed. According to the German Ministry effective prosecution often fails in proving personal culpability of the persons involved. Therefore the institutions themselves should be made more accountable.
9. Tax evaders should not be able to flee in the expiration of statute of limitations. The Ministry of Finance finds it unacceptable that when concealing their foreign relations tax evaders can speculate on impunity because of expiration of the statute of limitations. The Ministry argues that the period of statute of limitations should only start then when a taxpayer has complied with the reporting requirement for foreign relations.
10. Germany will keep intensifying its measures to combat money laundering. In recent years Germany has established strict guidelines and controls to combat money laundering in the financial sector. The Ministry states that now such same progress needs to be made in the area of money laundering control in the commercial sector, for which essentially the federal states are responsible. It is also stated that the Financial Intelligence Unit will be transferred from the criminal police to the Federal Customs authorities while at the same getting new competences and being equipped with significantly more personal. The Federal Government will also discuss with the states (Bundes Ländern) on how the fight against money laundering in the commercial sector in the federal system can be organized more efficient. According to the Ministry also a legal policy initiative for better possibilities of seizing profits realized via illicit activities, as well as for the introduction of tougher sanctions and an easier ways to freeze assets is needed.
The German Ministry seems to realize that combating tax evasion and money laundering can only be done effectively if jurisdictions will be worldwide working together. In other words as the Ministry states it: “Global effective solutions are needed”.
Click here to be forwarded to the 10-step plan as published on April 11, 2016 on the website of the German Federal Ministry of Finance. (Unfortunately, the 10-step plan is only available in the German language).
Update:
On April 12, 2016 the German Federal Ministry of Finance has also made an English version available of the 10-step plan (or 10 point plan as they call it themselves). This English version of the action plan as prepared by the German Ministry of finance can be found here.
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