Out-Law / Your Daily Need-To-Know

Monitoring of super-rich finances may rise as a result of tax information exchange, says expert

14 Aug 2015, 10:56 am

The OECD said this week that tax authorities around the world must improve their monitoring of the super-rich. While 85% of revenue bodies have set up dedicated divisions to manage large corporate taxpayers, far fewer have similar arrangements for high net worth individual (HNWI) taxpayers, the OECD said .

This is despite recommendations by the OECD's Forum on Tax Administration, and "evidence of significant growth globally in … numbers and wealth", the OECD said.

The OECD report ratifies what the UK has done in setting up its own High Net Worth Unit and, more latterly, the Affluent Unit, said tax expert Fiona Fernie of Pinsent Masons, the law firm behind Out-Law.com.

HMRC opened the Affluent Unit in 2011 to investigate the tax affairs of UK residents with an annual income of over £150,000 or wealth of over £1 million, which makes up around 500,000 taxpayers in the UK. Taxpayers with assets worth over £20m are dealt with by the High Net Worth Unit.

"I believe that both units are seen as quite a success," Fernie said. "It will be interesting to see whether the auto-exchange of information between countries will promote more of these units internationally. Other revenue authorities may look at that information and find that they have quite a lot of wealthy people on the list – and the number of units internationally might then suddenly grow."

The OECD said fewer than a third of the 56 tax authorities it surveyed had set up a dedicated unit to oversee the tax affairs of the rich. These units are important to "ensure that this segment of taxpayers receives the appropriate level of scrutiny to detect and deter non-compliance," it said.

The numbers of HNWIs grew by nearly two million in 2013, a 15% growth rate and the second largest increase since 2000. North America and Asia-Pacific saw the most growth, with Japan seeing significant growth, the OECD said.

As well as the UK, Australia, Greece, Indonesia and the United States have "relatively sizeable operations" dedicated to wealthy taxpayers, the OECD said.

Figures obtained by Pinsent Masons earlier this year showed that HMRC collected £137.2 million in additional tax as a result of investigations by its affluent unit last year; up from £85.7m in 2012/13.