Uruguay is no longer the Switzerland of the South
Uruguay gradually starting automatic data exchange with other countries and banking secrecy will a thing of the past
Uruguay is no longer the Switzerland of the South
Uruguay has long been the strong box of black money from Argentina and Brazil. Banking secrecy laws similar to Switzerland protected investors from investigation from their home countries. Some say Punta del Este was built on black money from everywhere from Russia to Australia.
The Uruguayan government has already made it more than clear that within two years, Uruguay would complete the automatic exchange of tax and financial information with other countries.
The automatic exchange is supposed to happen on both sides with the another state banks sending account information, purchase of assets and financial statements of companies and individuals of those who live or have assets in Uruguay. Given 25% of the farm land has changed hands to foreigners over past 5 years this will cause some disruption.
The USD Internal Revenue Service is now able to access banking information without judicial authorization and is on a equal footing with other foreign tax authorities.
Banking secrecy for tax purposes is coming quickly to an end as countries and major financial centers are now committed to an automatic exchange of information between jurisdictions,” said a statement from the Organization for Economic Cooperation and Development (OECD) May.
That was reflected in that 51 jurisdictions-including Argentina, Colombia, Germany, Italy, Malta, UK, Korea, have just closed in Berlin Multilateral Agreement on Tax Information Exchange and exchanges will be the first in 2017. Three other jurisdictions -Uruguay, Colombia and Niue- pledged to start automatic information exchange from 2017 (as reported yesterday by the newspaper The Observer), but without integrating the multilateral agreement.
The director of Argentina’s AFIP, Ricardo Echegaray welcomed the Uruguayan decision. Five other jurisdictions (including Panama) refused to sign the agreement and indicate a date for adopting the new scheme. These countries will be considered until they join crime centres by other tax authorities.
In addition, 34 jurisdictions (including Brazil, China, Canada, Switzerland, Australia, Russia) agreed to exchange information automatically from 2018, but like Uruguay without integrating the multilateral agreement.
The OECD promotes multilateralism, and Uruguay has agreed to sign with each country.
Uruguay made a political commitment to exchange information automatically. To do this you must first amend its bank secrecy law that requires prior authorization of the court,” Professor of International Tax and Financial Law at Catholic University and partner told El Pais Study Brum-Costa, Leonardo Costa. “Uruguay is committed to exchange of information vis-à-vis countries that signed treaties and not necessarily in the multilateral exchange,” he said.
Uruguay exchange tax information with the 29 countries that currently have agreements (which are Argentina, Brazil, Germany, France, Korea, Switzerland), but by specific requirements in cases of suspected tax evasion and with prior approval from the Justice .
With the change, to exchange data would “sweeping” without prior judicial intervention.Sometime this year, Uruguay shall exchange all tax and financial information it has on residents of a country with which we have agreed (eg the Argentine agency in that country). This supposed “financial statements, dividends, interest, asset sales results of companies and individuals,” Loaiza said.
The country will switch to the 51 jurisdictions signed the multilateral agreement at once, but will do so bilaterally with countries with which it already has an agreement. Don’t worry there are lots of tax havens left for corrupt politicians to use.
Costa said it would be “financial institutions who will have the burden of identifying not only to residents of a state or the other, but also bank accounts and reportable data, and even having to apply a system of transparency, in some cases, the effects identify the controlling persons or beneficiaries. ” This gives it “a kind of total and absolute lifting of bank secrecy and associated financial institutions, to the effect that financial information is transmitted mass continuously for certain periods of time,” he added.
For Costa “DGI should automatically access information, because if it does so why not foreign residents?” but it is “an open question”.
According Loaiza “do not be alarmist” and that “this is a gradual process,” but “represents a major challenge to privacy, the historical evolution that took Uruguay bank secrecy.”
These changes have been driven by the US which has by “Quantitative Easing” ie the printing of money in a desperate attempt to ensure US citizens are taxed at the maximum level. Many economist now believe that no matter what the US does now that a sovereign default will occur before 2025. This pressure to try and balance the books is driving these changes.
However whatever the reasons the Uruguay has entered a new era of bank transparency.
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