Filippo Noseda, a dual qualified English solicitor and Swiss lawyer, advises clients on international tax and estate planning issues and is looking for a hero who is prepared to question the lawfulness of the Common Reporting Standard (CRS) in a test case.
CRS is a global system for the automatic exchange of information developed by the OECD (Organisation for Economic Cooperation and Development), which has been adopted by 101 jurisdictions around the world.
The Human Rights Act, however, safeguards the right to respect for private life, including the right to respect for personal information, under Article 8 of the European Convention on Human Rights.
In a paper titled ‘CRS and beneficial ownership registers – a Call to Action’, Noseda argues that the registers and CRS are “identical once you strip away the complexity”, but while “everyone agrees on the shaky legal basis… of the beneficial ownership registers… there is a deafening silence surrounding the legality of CRS”.
The right to confidentiality
Noseda relates how everyone he meets tells him he is wasting his time but he is baffled because of the lack of proportionality between the fight against tax evasion and the right to confidentiality within CRS and the beneficial ownership register rules.
Arguing that CRS and the registers’ rules conflict with data rules, Noseda cites the European Data Protection Supervisor which commented on the Swiss/EU CRS deal in 2015: “The exchange of information on a certain number of accounts on an annual basis confirms our view that the information exchange is independent of the detection of any actual risk of tax evasion, thus questioning the proportionality of the measure itself…”
He proposes that low risk accounts should be exempt from reporting, the data collected should be restricted to legitimate policy goals, explicit data security protection standards should be set and old and unused information should be deleted.
In late 2016, the EU’s data working party told the OECD it had “strong concerns on the repercussions on fundamental rights… by CRS”.
“No one outside the data protection community seems to have understood the issue and taken governments to task,” he notes.
The ‘Paypal’ solution
The Mishcon partner supports a ‘PayPal’-type system. It entails the creation of a clearing house funded by governments and the banking sectors which could be used by financial institutions for the purpose of calculating and settling any tax liability without sending personal data outside the financial institution.
This ‘PayPal’ idea is an evolution of the withholding tax system developed in Switzerland under the name of ‘Rubik’.
Such a system would centralise compliance (thus relieving banks from the burden of calculating taxes for all those clients who opted to maintain confidentiality) without compromising either the right to privacy or data protection.
Another alternative would be to go back to the system of tax exchange, enshrined under Article 26 of the OECD Model, which was effectively vetoed by Switzerland over banking secrecy.
Despite 50 countries first reporting under CRS in September 2017, the controversy miring the beneficial ownership registers gives Noseda hope that lawyers might have the opportunity to bring the discussion on transparency and privacy “back from the brink”.
