And so it begins
We wrote about the OECD tax information treaty on the blog last year. It is now coming into effect, and governments are starting to take action.
Earlier in the year Nutmeg in the UK asked for my Japanese tax information in order to activate my account.
I got a letter from my bank (HSBC) last week with some information and a request for me to inform them of 1) my country of residence for tax purposes, and 2) my tax information number (My Number for Japan).
Here are the documents I received:
Most interesting bit? The fact that they will report both balances and any credits or interest to the account to the Japanese tax office.
Pretty painless paperwork, but it's going to make a big difference.
I had assumed the system was going to be fairly sophisticated and match accounts according to names and addresses.
It's going to depend on self-reporting, with penalties for not registering with the authorities.
I have read several articles about chasing tax avoiders in the UK, and the consensus seems to be that the authorities are completely overwhelmed and unable to pursue more than a fraction of the cases.
There are currently over 2 million foreign residents of Japan, of which just over 600,000 are permanent residents (there are also 140,000 people on spouse visas). I'm guessing the PRs and the spouses will make up most of the people who both have foreign accounts and have to pay tax on them.
The question then becomes: does Japan have the extra manpower to go through millions of accounts and potentially billions of transactions in order to find out whether people are properly declaring foreign income?
I'm guessing they will sort by the amounts in the accounts and focus most of their attention on the larger accounts. Where the line is drawn will probably come to light based on who gets called into the tax office to explain ;)
So over the next few weeks and months you can expect to get similar paperwork from your banks and financial service providers in other countries. The US government did not sign the treaty (funny how they expect the rest of the world to provide them with information for FATCA but don't want to reciprocate) nor did Singapore (presumably to protect their banking sector).
It's a good idea to report everything properly, but I know there are a lot of people who haven't so far. It's going to get harder in the future to evade taxes, and if the government manages to automate the data collection in any way using algorithms I presume a lot of people are going to be getting letters from the tax office.
What do you think? Have you received any letters like this? Will you register your My Number with your banks and providers abroad?