Austrian Tax Deal Will Withstand

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The Swiss Parliament´s President Hans Altherr thinks that the Swiss tax deal with Austria will withstand a popular vote.

Altherr expresses his optimism regarding the tax treaty between Switzerland and Austria in an interview with “Vorarlberger Nachrichten”. The treaty is signed and ratified, but a popular vote may still prevent the deal. In Switzerland, the young socialists and a citizens forum want to hold a popular vote on the tax treaty.
There is some resistance against the tax deal with Germany, but not with Austria, Altherr explains. The treaty with Germany would be much more far-reaching. The bilateral tax treaty should bring Austria up to € 1.0bn. For Austria, this would mean a loss of tax intake of more than € 1.0bn.

Until the end of September , the opponents of the tax deal between Switzerland and Austria have to collect 50,000 signatures of Swiss citizens. At the moment, there are 25,000 signatures. After the German federal state North-Rhine Westphalia has bought a CD from UBS, the opponents hope to motivate the Swiss people for voting against the deal. The opponents fear that Switzerland may give up its bank secret and its tax sovereignty.
A popular vote would take place on November 25. Otherwise the deal with Austria would enter into force in 2013. The citizens movement and the young socialists do not only criticize the tax deal with Austria, but also those with Germany and the U.K. Swiss political scientists do not excluded that the tax deal with the U.K. and Germany may be rejected, but that with Austria may be approved. Unlike German authorities, Austrian authorities do not buy CDs containing data of domestic tax evaders.
Altherr thinks that the Swiss financial hub may be weakened in the short therm. However, this may be an advantage in the long term. “What is crucial is that we underline our competence and our services, but not the legal loopholes.”

 

Support FATCA: New Intergovernmental Agreement

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Taxpayers with foreign accounts will want to take note of an agreement recently developed by the U.S. and several other countries, including France, Germany and the U.K. The "model intergovernmental agreement" is intended to implement FATCA, or the Foreign Account Tax Compliance Act. FATCA requires foreign financial institutions to report to the IRS information on accounts or insurance or annuity contracts with values above set amounts, and that are held by U.S taxpayers, or by foreign entities in which U.S taxpayers hold a substantial ownership interest.

The purpose of FATCA, which was signed into law in 2010, is to reduce the risk that U.S. taxpayers use accounts outside the U.S. to evade taxes. The recent agreement  is an important step to combating tax evasion based on the automatic exchange of information.

For foreign financial institutions, FATCA has presented serious administrative and legal challenges. Among other requirements, it asks them to identify U.S. accounts, and then report to the IRS the account holder's name, address and taxpayer identification number, the account number and balance, and in some cases, gross receipts and withdrawals from the account.As the intergovernmental agreement itself states, "FATCA has raised a number of issues, including that FATCA Partner financial institutions may not be able to comply with certain aspects of FATCA due to domestic legal impediments."

For the moment, two versions of the agreement were released: reciprocal and non-reciprocal. Both establish a framework within which financial institutions can report account information to their own tax authorities, which then will be automatically exchanged under existing bilateral tax treaties or tax information exchange agreements. They also call for the development of a common reporting and exchange model.

The reciprocal version of the model, as its title suggests, also provides for the United States to exchange the information it currently collects on accounts held in U.S. financial institutions by residents of partner countries. It states the U.S.' commitment to improve transparency and enhance the exchange relationship with its partner countries, by pursuing regulations and supporting legislation that would achieve equivalent levels of reciprocal automatic exchange. This version will be available to some countries with which the U.S. has an income tax treaty or tax information exchange agreement. 

In France, Germany, Italy, Spain,  U.K. and the U.S. released a communique, which endorses the model agreement and calls for bilateral agreements based on the model. It reads, in part, "France, Germany, Italy, Spain, the United Kingdom and the United States will, in close cooperation with other partner countries, the OECD and where appropriate the EU, work towards common reporting and due diligence standards to support a move to a more global system to most effectively combat tax evasion while minimizing compliance burdens."

Netherlands and Ethiopia sign a double taxation agreement

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After more the an year of discussions, Ethiopia and the Netherlands have signed a double taxation agreement (DTA) with the aim of boosting bilateral economic cooperation, trade and investment.

The Ethiopian Finance and Economic Development State Minister, Alemayehu Gujo, and Netherlands ambassador to Ethiopia, Hans Blankenberg, signed the agreement in Addis Ababa on 10 of August 2012.
The DTA exempts individuals and businesses in the two countries from paying taxes in both countries, and is intended to enable both nations to benefit from increased capital flows, trade of technology, goods and services.

The agreement also includes provision for the exchange of tax information between the two countries, and has an arbitration clause for the resolution of disputes and it is based on the Organization for Economic Cooperation and Development Model Convention.

The withholding tax payable on interest and royalties paid from one country to the other has been fixed at 5%, as has the withholding tax payable on dividends where a shareholder from one country holds more than 10% of a company in the other.

Alemayehu said that this agreement will take the already close relations between the two countries to a higher level, while Blankenberg added that it would help to enhance their relationship by providing Dutch investors in Ethiopia with certainty over the tax treatment of their investments.