UK to sign treaty with US to reduce £18bn tax shortfall

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The Independent Online

Britain signed a ground-breaking treaty with the US and two other countries yesterday that will set up an international taskforce to crack down on tax avoidance schemes that currently cost Western governments billions of pounds a year.

Britain signed a ground-breaking treaty with the US and two other countries yesterday that will set up an international taskforce to crack down on tax avoidance schemes that currently cost Western governments billions of pounds a year.

Top tax officials from the UK, US, Canada and Australia agreed to swap information about existing and proposed tax scams and to share expertise on how to prevent and punish tax experts who are promoting avoidance schemes.

The initiative builds on plans announced in last month's Budget by Gordon Brown, the Chancellor, to bring in new laws forcing tax experts - and businesses that use them - to disclose tax avoidance schemes to the Inland Revenue.

The agreement, which was signed on the fringes of this weekend's meeting of finance ministers of the Group of Seven nations, means tax officials in the four countries, which are home to some of the world's largest financial sectors, will be able to share information of abusive tax schemes. Experts believe the Treasury loses up to £18bn a year in revenues due to avoidance schemes, of which the lion's share is lost income tax, capital gains and corporation tax revenues.

A UK official in Washington said: "This agreement is explicitly designed to be drawn up by the operational experts, so it is not just warm words but it will practically make a difference."

The UK delegation was headed by Dave Hartnett, the deputy chairman of the Inland Revenue, and Chris Tailby, the head of VAT at Customs & Excise.

The international taskforce will be based in New York, the world's largest financial centre, and will be staffed by anti-avoidance experts from the four countries. It should be up and running by the summer. It will set up an internet database that will enable revenue officials to check in "real time" on existing tax avoidance schemes and shell companies and the organisations promoting them.

It will also act as a think-tank for governments to improve their anti-avoidance strategies. The task force will cover four main areas:

* Identifying abusive schemes and the firms promoting them, analysing how the scams work and how they can beaten;

* Sharing expertise, techniques and best practice;

* Enabling joint action to tackle schemes promoted across several jurisdictions and to prevent tax experts "playing off" one country against another;

* Monitoring industry developments and speculation to identify schemes before they are marketed to the business community.

The UK official said: "This will massively enhance our radar capacity for identifying new schemes and spotting attempts to get around the disclosure regime."

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