An interim report, set to be presented on May 14, “very clearly points in the direction of a revision,” the commission’s director general for taxation, Robert Verrue, told AFP on Tuesday.

“He said that the report aimed ‘to alert ministers to the current directive’s weak points’ in the wake of recent revelations of alleged tax fraud by rich Germans hiding their cash away in Liechtenstein.”

The savings tax directive , in it’s present form, already requires EU member states to share tax information with one other on interest income kept by account holders from other EU countries.

However, special arrangements have been made for Austria, Belgium and Luxembourg to protect their jealously guarded banking secrecy.

“The EU has similar bilateral agreements with a clutch of countries and territories known for their banking secrecy laws, including Switzerland and Liechtenstein.”

“However, the savings directive allows considerable scope for people to set up foundations in order to get around the rules, which also do not cover such revenues as dividend income or capital gains.”

“The directive also does not cover fast-growing Asian offshore banking centres such as Hong Kong, Macau and Singapore, with which the EU is struggling to negotiate similar information-sharing accords.”

EU members are obviously deeply divided on the issue of banking secrecy. In light of this, the commission has said it, “will try to find out on what points there are nevertheless a majority” in agreement, before making proposals.

HM Revenue & Customs (HMRC) is contacting approximately 5,000 people whom it believes have undeclared assets and investment income in offshore accounts.  HMRC is saying that they have one last chance to come clean or face stringent penalties.

“Accountant PKF said the measures turn one of the central tenets of the English legal system on its head — by presuming that taxpayers are guilty and demanding proof of innocence.”

“Tax investigations partner John Cassidy said: “Legally, to issue an assessment for unpaid tax, HMRC must have made a ‘discovery’ or, in other words, have actual knowledge that further tax is due — not just that it might be due.”

While taxpayers aren’t under legal obligation to respond to inquiries, those who fail to will face an investigation and potentially large financial penalties.

The chief of taxation at the Association of Chartered Certified Accountants, Chas Roy-Chowdhury, said:  ‘They (HMRC) are depending very largely on the willingness of offshore account holders to inform the taxman of their financial details, but if this is not done proactively, the taxman will find other ways and means, such as targeting banks and finance providers.

‘This is an opportunity to put things right with the taxman, but they also warn that if a disclosure is made which shows interest and income has been received, then interest is payable and in some cases the taxman will seek ‘penalties’.

While the HMRC has said they will take cooperation into account, penalties will now be no less than 30 percent of the sums due.

“‘Tax evaders had their chance to come clean and pay reduced penalties of 10 percent last year,’ said Gary Ashford, a tax investigations director at accountant and business adviser Grant Thornton.”

“‘Now, HMRC is playing hardball and will be taking no prisoners.’”

New York’s district attorney office in conjunction with the US Department of Justice  are investigating US dollar payments made through Barclays branch in New York.

The district attorney and Department of Justice are attempting to determine whether particular payments came from entities on the US blacklist.  Cuba, North Korea, Sudan, Iran, and Syria have been placed on the US blacklist for alleged links to terrorist organizations and in some cases, state sponsored terrorism.

Banks, even foreign banks, located in the US, are restricted from executing US dollar based transactions for clients on the US blacklist.  This restriction was put in place to help block direct sponsorship of US-based terrorists.  Washington DC is urging Europe put similar restrictions in place.

“Ellen Zimiles, chief executive of Daylight, which advises firms on compliance with America’s Office of Foreign Assets Control and other laws, says: ‘Non-US institutions which operate in the US have to make sure their people have proper training and understand what the issues are.’”

Barclays is conducting an internal review and is optimistic that the investigation by the US Department of Justice is not likely to have “a material adverse effect” on its finances.

“In 2005, ABN Amro was fined $80 million for transactions through its New York office that failed to comply with regulations aimed at preventing money laundering.”

Many UK citizens are rethinking their asset protection and tax avoidance strategies. Under new EU plans, banks will be required to share with relevant taxation authorities, finance and  banking data relating to clients’ income.  The information up for grabs includes that from trusts capital gains and dividend payments.

Mike Warburton, accountant for Grant Thornton, told the newspaper that many people are stashing funds from offshore bank accounts in tax havens such as Dubai and Singapore, which are exempt from the rules.

“He explained: ‘These are sophisticated financial centres, they remain outside the rules for now and non-domiciles who genuinely want to keep their financial affairs secret may see some benefit in setting up vehicles in these countries.’”

According to the Daily Telegraph, last week, all but one of the 26 EU finance ministers voted for a  plan to tighten bank secrecy rules within the EU.

The report comes on the heels of the tax scandal centered on a Liechtenstein bank that hit Germany last month.  In light of this, it’s not suprising that Germany is leading the push for tax law changes. 

The commission said it would produce a report in May and complete a formal review in June.

“German Finance Minister, Peer Steinbruck called the scandal, that included the arrest of Deutsche Post head Klaus Zumwinkel on charges that he diverted large sums of money to a bank in Lichtenstein, ‘a spectacular tax fraud.’”“More than 70 Germans have confessed to tax evasion.”Luxembourg, Belgium and Austria maintain they will push to maintain the right not to disclose sums deposited by foreign investors, the report said.

The current Eurozone tax agreement established in 2005, took 14 years of difficult negotiation. It covers the Eurozone, plus Switzerland, Liechtenstein, San Marino, Monaco and Andorra and 10 former British and Dutch colonies.

Reportedly, the BND intelligence service paid an informant 4.2 million euros ($6.17 million) for a disk with Liechtenstein bank data on over 1,000 tax evasion suspects.

“The Finance Ministry spokesman did not deny the reports and added: ‘It’s money well invested.’”

The home of Deutsche PostChief Executive Klaus Zumwinkel has already been raided and the probe threatens hundreds more rich Germans. Zumwinkel will quit as Deutsche Post CEO on Monday, the company said on Friday.

Zumwinkel is suspected of evading about 1 million euros ($1.5 million) in taxes by transferring money to tax haven Liechtenstein.

Hundreds more prominent Germans  will likely be part of the probe into offshore accounts.

“Liechtenstein Prime Minister Otmar Hasler is due to meet German Chancellor Angela Merkel and her finance minister, Peer Steinbrueck, on Wednesday in Berlin for talks on the missing millions.”

“Finance Minister Steinbrueck told reporters on Friday Zumwinkel had admitted evading taxes. Zumwinkel himself has not been available for comment.”

“The concept was discussed on Monday when Minister of Finance Dr Ashni Singh chaired a meeting of senior government officials and representatives of the GAB. According to GINA, government intends to undertake an assessment of the institutional arrangements and legislation that would need to be in place in order for Guyana to serve as an OFC.”

An assessment would necessitate the review of existing and draft legislation, to include the Anti-Money Laundering (AML) Bill currently before Parliament. Guyana would review of the experience of OFCs in the Caribbean and their relevant legislation as well.

“OFCs exist to provide financial services such as banking, insurance and asset management to mainly non-resident individuals and entities.”

“The OFCs generally offer to investors, distinct benefits including favourable tax and regulatory regimes, and the ability to make deposits in foreign currencies. They also offer highly confidential services.”

Tax Crackdown On Foreign Non-Doms May Hurt London 

If Chancellor Alistair Darling goes ahead with plans for a tax crackdown on non-domiciled foreigners, business tycoons will desert the UK, a former Lord Mayor of the City of London warned.

“Sir Michael Savory said investors may choose to base themselves in Dubai or Singapore if Mr Darling imposes a planned £30,000 annual levy.”

The plan calls for non-domiciled foreigners living in Britain for more than seven years and wishing to keep their offshore income out of the UK tax system to be charged £30,000 annually.

“Sir Michael said: ‘The reality is that investors who come over here, businessmen who are based here, can move anywhere in the world if they want to.’”

“‘If we are moving to a high tax regime, as we are at the moment, they will migrate - Dubai, Hong Kong, Singapore.’”

“‘These are all markets that will be eager to see these investors move to their territory.’”

“Prime Minister Gordon Brown was ‘prudent enough’ during his tenure in Number 11 not to introduce a non-domicile tax, Sir Michael said.”

On Monday Liechtenstein-based bank LLB  disclosed that it has been the target of a blackmail campaign since 2003.  An employee threatened to publish the secret banking account details of German clients.

‘”A former employee blackmailed the bank with used, internal documents concerning German bank clients,” said LLB, or Liechtensteinische Landesbank. “He threatened to circulate the documents.”‘

According to LLB, the employee was arrested sentenced and imprisoned in  2004.  While the former employee remains in prison, a former accomplice continued blackmailing the bank.  An additional person was arrested in September and remains in custody in Germany, LLB said.

‘The statement follows an article in German magazine Der Spiegel that said LLB had paid out 9 million euros ($13.11 million) as part of the blackmail affair, which affected hundreds of German clients who stashed savings in secret accounts in the tiny Alpine enclave.’

‘Sandwiched between Austria and Switzerland, the principality of Liechtenstein is home to three mid-sized private banks — Swiss-listed LLB and VP Bankand the unlisted LGT Bank in Liechtenstein — and scores of small wealth managers who boast discreet banking services for international clients.’

Liechtenstein is noted for strong bank secrecy laws.  They are considered more strict than even those of  Switzerland.  Switzerland is generally considered the world’s largest offshore banking centre.

Individuals looking to move overseas or expatriate themselves have more options these days in the way of banking.

‘Consumers who are thinking of moving abroad could opt to take out offshore banking accounts, NatWest has suggested this week.’

Offshore banking accounts are getting more sophisticated and may better be able to deliver the products that expatriated individuals need while living overseas

‘Products in this sector are growing in stature and therefore should be considered by such individuals, an official at the bank noted.’

In addition, the financial benefits, including but not limited to increased financial privacy and a shielding of the expats assets from litigations and unecessary taxation were noted as potential benefits for moving ones assets offshore.

‘Head of NatWest international personal banking Dave Isley argued that there are many benefits to be seen from such banking methods, including those on the “taxation side”.’

‘And there is a “suite” of products on hand for people in a totally different area of the globe, he suggested, including cheques and credit cards.’