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Das Online-Magazin der Schweizerischen Bankiervereinigung
21. September 2016

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Regularisation facilities at the eve of the AEOI

Regularisation facilities at the eve of the AEOI

The AEOI doubtlessly launched a new era in the combat against tax evasion. Its introduction, however, also raises the question of regularisation facilities.

As global leaders in offshore wealth management and also considering the strategic goal of managing tax-compliant assets only, Swiss banks have been particularly interested in encouraging their clients to enter into feasible regularisation programmes. Banks in Switzerland have been actively supporting clients on their way to tax compliance during the past years. They consequently advocated the introduction of regularisation programmes that would allow non-compliant taxpayers to come forward and settle their tax situation. In fact, this approach was also advocated by the OECD, as the “(…) proactive use of the increasing amounts of information available to detect and counter offshore evasion, should be accompanied by programmes that encourage taxpayers who want to regularise their affairs to do so.”

Banks in Switzerland have been actively supporting clients on their way to tax compliance during the past years.

From a banking standpoint, encouraging clients to make use of practicable regularisation facilities is clearly beneficial since such programmes enable the bank to maintain the client relationship and reduce legal risks. Additionally, involved taxpayers achieve legal certainty and may – depending on the design of the programme – benefit from reduced interest charges or an exemption from penalties and legal proceedings. And last but not less important, the jurisdictions that apply successful programmes may experience immediate or mid-term positive effects such as revenue and efficiency gains.

Different shapes, same goals

Over the past decades, policymakers, both in developing and developed countries, introduced different types of regularisation facilities. In general, regularisation programmes may be categorised into two major groups: tax amnesties and voluntary disclosure programmes (VDPs). The latter may be introduced as permanent facilities or special programmes with limited duration. In contrast to amnesties, VDPs normally offer a narrower scope of incentives and – as it is the case in Switzerland – do not provide for reduced tax or interest liabilities. Nevertheless, each regularisation facility, regardless of its design, end-date or incentives, is aimed at increasing tax compliance as well as at collecting missing tax revenue.

Carry on the momentum…

Recent developments in the period before the entry into force of the automatic exchange of information (AEOI) show that an increasing number of countries with large populations of wealthy persons that choose to invest their wealth offshore (namely in Latin America and Asia) introduced newly-designed regularisation programmes. Without elaborating further on the theoretical aspects of their influence on taxpayer behaviour (incentives to come forward vs. rewards for misconduct) as well as on the perceived costs and benefits of such programmes, the most recent regularisation facilities in countries like Brazil, Argentina or South Africa are to be welcomed.

Regularisation programmes may be categorised into two major groups: tax amnesties and voluntary disclosure programmes.

This applies particularly as the AEOI presents a significant change in the global tax system. Taking into account the restricted time window before the AEOI comes into effect, (1.1.2017 for countries that follow the regular implementation timeline), such facilities present the last opportunity for persons that want to regularise their tax affairs.

It is therefore desirable that further countries without appropriate possibilities for regularisation will make efforts to provide their taxpayers with the above mentioned facilities. Furthermore, such efforts should be made irrespective of the AEOI implementation, as regularisation programmes are generally to be considered as an effective tool to encourage uncooperative taxpayers to meet their tax duties.