SAVING PRIVATE CLIENT – MANAGING CLIENT TRUST AND NEGOTIATING THE COMPLICATIONS OF TAX DATA CONFIDENTIALITY

Wealth Management & Private Banking

Wealth Management & Private Banking

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Experts: Mike Foxall, Head of Wealth at IWI and EY 

Moderator: Alex Johnson 

Key Message 

The overwhelming accordance with FATCA continues to reignite the debate of tax avoidance and tax evasion. The inescapable rise of transparency, due in part to the recent fallout from Panama and the Bahamas, are at the forefront of client sentiment. 

Delegates of the roundtable also discussed the different ways wealth managers can prepare and guard their clients’ information, whilst providing accurate, country-specific advice on a case-by-case basis. 

Headlines 

  • The tax landscape has changed significantly over the last five years as the Common Reporting Standard, signed by over 100 jurisdictions, takes precedence.
  • UK and global governments are lining up their strategy to tackle tax avoidance, while continuing to make wholesale changes to legitimate tax planning.
  • The continuing focus needs to be about helping clients better manage their tax planning issues, building trust and earning loyalty. 

Key themes

Tax planning has shifted significantly in recent years with regulation changing the way that individuals can engage with structures for tax optimisation. Due in large part to FATCA and common reporting standards there is an overwhelming rise of transparency, while clients have become increasingly concerned about confidentiality for their financial affairs.

“Tax authorities are seen as intrusive and far reaching, but clients themselves want greater transparency in the offshore tax arena.”

The role that advisors play, both through the physical management of clients’ tax affairs and their concerns over financial privacy must be held to a very high standard. Furthermore, the role banking institutions play is crucial. An example of this is when clients put self-declaration forms in front of their bank, the institution is not in a position to say whether it is right, wrong or indicate whether there is an error with the information shared by the client.

“Clients are tightrope walking around tax transparency issues, everyone is feeling vulnerable; senior management have a real responsibility to help clients deal with tax avoidance. Now is the time to handhold clients.”

The new measures to tackle offshore tax evasion recently established by the government now legislate through Corporate Criminal Offences:

  • A new criminal offence for corporations that fail to take adequate steps to prevent the facilitation of tax evasion;
  • Tougher financial penalties for offshore evaders, including a penalty based on the value of the asset on which tax was evaded as well as wider public naming of offshore evaders;
  • A new penalty regime for those who enable tax evasion, based on the amount of tax evaded and public naming of enablers;
  • A new criminal offence to make prosecution easier by removing the need to prove intent where a large amount of tax has not been paid on offshore income and gains.

Corporate criminal offences are a direct result of turning the heat up on tax evaders.

“The bank, legal and tax worlds have not come together to better serve the client. Accountants need the support of other client advisers to better manage the exposure correctly.”

Conclusions

Private client tax planning needs to be resurrected, it has gone through a long period of disparagement and now it should be about defining tax planning as tax efficiency rather than tax avoidance.

HNW clients require greater control of their private held information, being able to deal with cyber-attack issues is a more and more prevalent issue within the industry now.

The public need to continually be helped to answer: “what is tax efficiency when it is not tax avoidance?” It is time to take the phrase tax avoidance off the table. it is now a case of everyone being efficient.

The key question for the delegates was whether this situation offers an opportunity for wealth managers, private banks, private asset managers or private client tax accountants. Clients require help to navigate and establish more accepted, longer term strategic cross-border solutions. Industry operators now need to define how this could be shaped.

 


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