Outside of the Panama papers fallout, one thing that does seem certain is that the “old ways” of doing business via International finance centres (AKA offshore tax havens), the use of complex “tax mitigation” and “avoidance” schemes, and use of International Business Company (AKA shell companies) to place (AKA hide) wealth will become, for all intents and purposes, things of the past.

Competing in the modern age of tax transparency and openness will require companies and partnerships, and their associated persons, to demonstrate their commitment to an ethical (as opposed to simply legal) approach to both corporate and individual taxation.

As we all know the global mood in relation to tax evasion, unprecedented levels of inter-governmental co-operation, legislation such as

1. FATCA,
2. the introduction of the Common Reporting Standard (which provides for automatic exchange of tax information between almost 100 countries),
3. recent EU plans to force the world’s biggest multinationals to report their earnings in each EU member state and
4. International efforts to investigate and prosecute companies accused of wrongdoing.

IN addition the UK Government has announced the proposed introduction of a new corporate offence of failing to prevent the facilitation of tax evasion AND the new offence is likely to build on draft legislation produced in response to a consultation undertaken by HM Revenue and Customs (“HMRC”) in 2015.  The new offence is likely to resemble the UK Bribery Act 2010 (“Bribery Act”) by:

1. Holding corporations liable for acts of their “associated persons” and
2. Having extensive extra-territorial application.
3. There will also be a defence of having “reasonable procedures” in place to prevent the facilitation of tax evasion (as opposed to “adequate” procedures under the Bribery Act);

The offence is to be introduced in legislation this year AND Companies and partnerships incorporated in or conducting business in the UK will need to implement relevant policies and procedures as appropriate.   The proposed offence will be of significant interest to all corporations with a nexus to the UK, including, the following, whose employees, agents or other “associated persons” are providing tax advice or related services to clients on behalf of the corporation, or who make referrals to third parties that provide those services:

1. banks
2. firms of accountants
3. financial planners
4. wealth managers
5. law firms, and
6. tax consultancies

Such entities will need to design and implement policies and procedures to ensure that they can take advantage of the “reasonable procedures” defence in the event that a problem arises.

Whilst it seems likely that a brief period of time will be allowed for those affected to prepare for the new offence, companies with a nexus to the UK should be giving active consideration to their policies and procedures as soon as possible.

And against ALL these matters an interesting question is whether the new offence will revive interest in the adoption of a more general corporate offence of “failing to prevent financial crime” (as advocated by David Green QC, the director of the Serious Fraud Office) which the government last year signalled was not being progressed, at least for the time being.