|Delayed - 11/23 04:10:00 pm|
Counting On Convergence: Why Regulatory Cooperation May Not Have Peaked
|10/08/2020 | 08:10am|
A wave of tax, transparency and economic substance regulation has transformed the corporate services industry over the last decade, subjecting global financial centres to increasingly more robust rules.
After the global financial crisis (GFC), the interests of the US and the EU aligned to drive greater transparency into private and corporate clients' financial activity, and to address a perceived tax gap.
Signs of a slowdown
Running in parallel with this regulatory progress,
It is clear that we are in different times now. No one is certain that, in the teeth of the worst global pandemic in more than a century, developments on all these issues will continue at the same pace.
Many of the governments that eagerly pressed ahead with increased international cooperation may be bound to look at the deterioration of their economies during 2020 and consider whether further cooperation should take a backseat for now.
And, while Covid-19 is perhaps the dominant factor giving rise to this view, it is not the only driver. The US-China trade war, the detached relationship between the US and
Differences of opinion over what form international cooperation should take in areas such as information sharing, beneficial ownership registries and corporate tax rules are another reason why governments may want to slow the pace of change.
For example, the US has not signed up to the CRS and a possible change of president in
National interest is creating friction in some BEPS discussions, too. The taxation of the digital economy is a particular sticking point between the US and
On economic substance, the EU has deemed the
More to unite than divide
In the majority of these cases, however, the points of friction that tend to attract most attention represent just a small part of a bigger picture, which is one of shared underlying interests.
Underpinning both CRS and FATCA was a shared ambition by
Meanwhile, issues such as the taxation of the digital economy may simply prove too important for the international community to risk halting all progress.
The Covid-19 pandemic may also create renewed momentum for further scrutiny of offshore business among major developed economies. As we saw in the wake of the GFC, this agenda tends to increase in prominence when governments feel under urgent pressure to raise their revenues.
So, while the path of regulatory cooperation never runs smooth, and is perhaps in for a rougher ride in the short-term due to economic strife and political pressures, the balance of interests will almost certainly err towards greater alignment.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Tel: 617474 1600
© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source