Is It Just Black Or White?

Nov 16, 2016 | 0 comments

Black lists used to be a sort of smoke filled, back room affair only discussed in private. But these days they are being eagerly wielded as significant geo political threats. UAE is the latest country to be targeted for media attention, with the news that the G20 is threatening to blacklist the UAE on the basis that it has not yet signed up to the OECD’s tax information sharing system – often referred to as CRS/AEoI and more recently under the acronym GATCA. What sits behind this of course is a general trend (started by the US with its FATCA regulation) of countries wanting more and more information about their citizens’ affairs – especially the ones they conduct on foreign shores.

It’s interesting to note that UAE has stepped up to the plate with FATCA, having signed an Intergovernmental Agreement (IGA) with the US in 2015. So, they clearly don’t mind (or had no choice about) passing information about US taxpayers to the IRS. It might instead be that the OECD is merely keen to highlight the potential downside of not getting on board with GATCA. The OECD of course has no power to enforce, and so the message must emanate from G20 as possibly the largest trading group of countries that can affect behaviour at a governmental level.

Black List Issues

 
blacklistMy concerns about all this are three-fold. First, I have a real concern that all this data is being shared simply as a mechanism to get around domestic data protection laws. In fact, most electorates aren’t even aware that its happening, and that there’s an extent to which this tax-triggered effect is diluting the principles of data protection (to the degree that tax appears to have an opt out clause). What next I wonder.

Second, governments (among many others) are not renowned for keeping data secure. What they’ve created is a world in which cyber criminals will know dates of transmission, methods of transmission and the content of the data. Just think about that. A hundred countries sharing the tax information data packets of foreigners on a published schedule means there are ten thousand permutations of data being moved around the world containing account numbers, names, addresses, gross credits and withdrawals. If Wikileaks got hold of that data, the Panama Papers scandal would become a footnote in comparison.

Finally, this is not just about tax today, nor is it about a reactive system in which threats of blacklisting are made as a way to get key players to the table. Panama has had its critics – but so also do Malta, Lichtenstein and Mauritius to name but a few. The governments of these countries are all challenged by their historical position, which affecting how the world sees them today.

Of course, I’m not party to UAE’s thought processes, but as a somewhat informed observer of the global picture, I’d think that most of these traditional tax havens actually have a bigger issue. How can they transform their reputations while retaining some of the benefits they derive from being financial centres? Panama got caught. UAE appears to be in a grey area, under threat for not moving fast enough. It’ll be interesting to see whether any of the others make a positive effort to get ahead of the curve. Perhaps we need a grey list too – moving forward but not as fast as some people would like.

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Author

Ross McGill

Ross McGill

CEO, TConsult

Ross McGill is the CEO and subject matter expert for TConsult. Ross is a specialist in QI and FATCA operational compliance, cross border tax reclaims, relief at source and information reporting. He over 23 years of experience in financial services, including 19 years at C level; and 30 years’ senior management experience in blue chip FMCG, including sales, marketing and operations.

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