Officials from the Organisation for Economic Cooperation and Development (OECD) are concerned that residence by investment (RBI) schemes are being used to avoid the common reporting standard (CRS) and it is looking for ideas to clamp down on abuses.
While the organisation accepts there are legitimate reasons for individuals to be interested in RBI and citizenship by investment (CBI) schemes, it warned that they can “offer a backdoor to money-launderers and tax evaders”.
In its consultation document, the organisation stated it wants to build upon the deterrence of mandatory disclosure of CRS avoidance arrangements and structures.
Additional measures may include “both tax compliance and policy related measures and will take into account the possible role of all stakeholders involved, including the jurisdictions offering these schemes, the tax administrations of jurisdictions participating in the CRS, financial institutions subject to CRS reporting, the intermediaries promoting the schemes and taxpayers”.
“It is madness to target countries who have legitimate residence schemes to support their economies, just because some will lie on a form about their residence."
Industry experts reacted with scepticism to the proposals, which focus on tax evasion involving lying on forms.
Robert Macro, private client partner at law firm Druces, said there could be unintended consequences of the measures: “Misrepresentation, of course, is wrong; but the OECD should not prevent the ability of nation states to compete on taxation where otherwise smaller economies can be decimated.
“If the will of the global economy is to prevent tax competition, then I am guessing there will be an acceptance for more international aid to those countries damaged by such controls.”
Louise Stoten, senior partner at private client law firm New Quadrant Partners, said: “It is madness to target countries who have legitimate residence schemes to support their economies, just because some will lie on a form about their residence.
“Surely this is a risk with any dual resident national who may not want to disclose to both.”
Responses to the OECD are sought before 19 March.
Investment Migration Council
Industry association the Investment Migration Council which represents practitioners, due diligence firms, real estate companies, and governments in this field, is formulating a position paper to be submitted to the OECD for consultation.
“It is in our direct interest to make sure that the opinion of the key players of the industry — our members — is heard and taken fully into account,” said chief executive Bruno L’ecuyer.
Submissions via the IMC are invited before 10 March by email to email@example.com in Word format.