All Brazilians’ offshore accounts will be identified within 2 years
By Chengdu, China|
Brazilian holders of accounts abroad, even those who use complex disguises, are going to have their names disclosed to Brazil’s Federal Revenue within two years, according to the Organization for Economic Cooperation and Development (OECD).
The existence of companies with bearer shares and legal arrangements as trusts allow tax evasion of fortunes. The lack of information about the real beneficiary of these shell companies has prevented criminal or tax liability. From late 2018, when Brazil implements, as promised, the automatic exchange of bank information with other countries, the situation is likely to change.
“With the automatic exchange of [financial] information coming into force in 2018, Brazilians with offshore accounts, including those via opaque structures, will be identified and information about their accounts will be forwarded annually to the [Federal] Revenue”, Pascal Saint-Amans, director for the tax department at OECD tax, told Valor.
The Common Reporting Standard (CRS) for the automatic exchange of information, which more than one hundred countries have committed to adopt from next year or from 2018, provides that the data to be sent should include accounts comprising all types of income investments (interest, dividends, life insurance, etc.), as well as account balances and sale of financial assets.
Banks and firms that manage securities deposits, brokers, some collective investment organizations and insurance companies should also give information about Brazilians’ accounts abroad.
The reportable accounts include data of individuals and entities, including foundations, and also names of the beneficial owners of passive entities, that is, more opaque mechanisms that help tax evasion. However, in practice some financial centers still resist giving all the information. Switzerland, the world’s most demanded country in terms of providing banking information to other countries, continues refusing to provide data on owners of bearer shares, whose identification is essential.
The situation is similar to the opaque structure of Delaware. However, the Barack Obama administration has pledged to adopt a standard before the presidential election in November, and will start requiring the identification of beneficiaries of companies with limited liability (LLC), even when the firm does not have activities in the US.
The OECD global forum on fiscal management has recently adopted a Common Transmission System (CTS), which is the first global system of bilateral exchange to operationalize automatic transfers of tax information.
Data security is considered essential, so an advanced encryption mechanism will be used for each transmission.
The Panama Papers scandal this year showed that, despite some progress, the fight against tax evasion has a long way ahead. This week, The New York Times reported that businessmen and corrupt officials in several African countries also used shell companies to hide profits from the sale of natural resources and bribes that made easier the access to them, according to data from law firm Mossack Fonseca.
Two weeks ago, the United Nations Conference on Trade and Development (UNCTAD) published a study showing that fraudulent revenues in trade bring losses of billions of dollars in exports of commodities such as copper, cocoa, gold and oil by Chile, Ivory Coast, Nigeria, South Africa and Zambia.
The conclusion is that the underpricing or overpricing in international trade is one of the major means for illegal remittance of funds from developing countries, with billions of losses for these economies.
The UNCTAD data are more conservative than the conclusion about Brazil made by Global Financial Integrity (GFI) in 2014. The US NGO estimated that the illegal revenue from trade accounted for 80% to 90% of funds lost by the country.
Based on data submitted by Brazil to the IMF and the World Bank, GFI estimated that illicit capital outflows from Brazil totaled $401.6 billion from 1960 to 2012.
“The deliberate underpricing of exports is the preferred method of transferring illicit funds from Brazil, and not the overpricing, of imports,” according to the GFI report.