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In 2010 the US Congress enacted the Foreign Account Tax Compliance Act (“FATCA”) which requires US financial institutions to withhold a portion of payments made to foreign financial institutions (“FFIs”) who do not agree to identify and report information on US account holders. While FATCA targets non-compliance by US taxpayers, it is likely that in reviewing their client databases, FFIs will create digital files for tax residents of all countries and not only the US. In a 2013 press release, U.S. Treasury states that more than 80 countries will be complying with FATCA and are actively considering adopting its approach with respect to their own residents who hold offshore accounts.

On October 8th, 2014, the Swiss Conseil Fédéral confirmed that Switzerland intends to provide a legal basis for the automatic exchange of information in sufficient time to permit its financial institutions to commence collecting data on foreign taxpayers in 2017 and to commence exchanging such data in 2018. Canada and Switzerland have signed the Convention on Mutual Assistance in Tax Matters, which provides for the automatic exchange of information. The Convention should enter into force in Switzerland once the legal basis for automatic exchanges is enacted.

The following developments are also noteworthy.

1) On July 17th, 2012, the OECD issued an update to its model tax convention which effectively broadened the scope of the obligation of the Swiss to provide information to Canada when requested to do so under the Canada-Swiss tax treaty. In particular, where Canada is conducting a tax investigation of a particular individual, it can request information about accounts held by relatives. Furthermore, where Canada has investigated the use of foreign credit cards and the data indicates that the cardholders were Canadian residents, Canada can request “the name, address, date of birth of the holders of the particular cards and any other person that has signing authority.”

2) The Canadian Revenue Agency (“CRA”) reported that as of May 31st, 2014, it had received more than 800 calls on its Offshore Tax Informant Program telephone line (“snitch line”), and is so far pursuing 80 leads.

3) In 2007, an informant provided the CRA with a list of 182 names of accounts at a bank in Liechtenstein. It was the first time the CRA had received such a list and valuable lessons were learned. In testimony before the House of Commons Standing Committee on Public Accounts, Richard Montroy, a senior CRA official, described the lessons:

“What we learned from the first list … is how people structure their affairs to get under the radar screen. … [[I]t’s what transactions do they do, what countries do they go through to hide their assets, whether they use intermediaries or tax professionals, and how they go about conducting the business to ensure that the money is kept offshore and that we have not identified it initially. So I would say that the Liechtenstein list helped us immensely by seeing the psyche of people trying to avoid paying tax.”

Mr. Montroy also told the committee that there has been a dramatic increase in voluntary disclosures involving offshore accounts or assets; from 1,125 disclosures in 2006-07 to close to 4,000 in 2012-13 (with unreported income in 2012-13 exceeding $1.77 billion).

4) The approach of the CRA and the Quebec Revenue Agency in the cases of the HSBC stolen data and the BVI data released by the International Consortium of Investigative Journalists indicates that taxpayers who are caught before disclosing will be dealt with severely.

David H. Sohmer est un avocat fiscaliste et l’un des fondateurs de Spiegel Sohmer.