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OECD Seeks Views On Taxation Of The Wealthy

by Ulrika Lomas, Tax-News.com, Brussels

04 November 2008


The Organisation of Economic Cooperation and Development (OECD) has announced that it is seeking comment from interested parties on its study into tax compliance issues surrounding high-net-worth individuals across the world.

The consultation is based on an OECD discussion paper which explores concepts of "cooperative compliance" and the creation of a framework to encourage high-net-worth individuals (HNWIs) and their advisors to volunteer relevant information.

This project follows on from a 2008 OECD report entitled “Study into the Role of Tax Intermediaries” commissioned by the OECD’s Forum on Tax Administration (FTA) at its meeting in Seoul in September 2006 and discussed at the FTA’s Cape Town meeting in January 2008.

While this study focussed on large corporate taxpayers, the OECD noted in its findings that the concept of an “enhanced relationship” with tax administrations may also have application to HNWIs and to banks, in particular investment banks.

In March 2008 the OECD set up a focus group to carry out the follow-up study on HNWIs. The focus group consists of the following 14 countries: Australia, Canada, Ireland, Italy, France, Germany, Japan, Mexico, the Netherlands, New Zealand, Norway, South Africa, United Kingdom and the United States. Separate work is being carried out in relation to banks.

The OECD observes in its discussion paper that taxpayers at the top of the wealth or income scale "make a significant economic contribution to society and account for a large part of total income tax, thus there is much revenue at stake for national tax administrations when dealing with HNWIs. In Germany, for example, the top 0.1% of taxpayers pay about 8% of total income tax and the top 5% of taxpayers pay about 40%. In the United States the same top 5% pay 60% of total income tax.

"Whilst it is recognised that HNWIs are not a homogenous group, they are likely to be linked by the scale and complexity of their business, personal and tax arrangements (domestic and/or international), access to more sophisticated tax products, offshore opportunities and by more varied sources of income giving more possibilities for planning," the discussion paper states.

The OECD insists however, that the scope of the paper is focussed on "improving compliance relationships within the existing legal framework." However, it does not rule out pursuing "other strategies" where there is a risk of tax avoidance or evasion, such as mandatory disclosure rules, promoter penalties and additional reporting requirements.

The OECD said that comments can be submitted anonymously to the consultation between now and December 31, 2008. The organisation then plans to hold a public discussion on the issue at its headquarters in Paris in February 2009.

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