Governments across the world have collected more than €37bn of tax from secret offshore accounts since 2009, it emerged on Monday as new details were unveiled of the next phase of the global crackdown on tax evasion, the Financial Times reported. The Organisation for Economic Co-operation and Development published its global standard for automatic information exchange, aimed at removing the secrecy that provides evaders with safe havens for their cash. The new rules on automatic information exchange are the latest move by governments mounting a concerted attack on evasion in the wake of the global financial crisis and a series of tax scandals. “Today’s launch moves us closer to a world in which tax cheats have nowhere left to hide,” said Angel Gurría, OECD secretary-general. The Paris-based OECD said “vast” amounts of untaxed money was kept offshore but more than half a million taxpayers had already taken advantage of voluntary disclosure programmes – which offer reduced penalties to taxpayers admitting to secret offshore accounts. The €37bn collected through the disclosure schemes offered by a range of countries including the US, France and UK was a sign that the crackdown on bank secrecy has already had a big impact, it said. Since 2009, tax authorities have been able to request information about offshore accounts but only in cases where they have grounds for suspicion. The move to automatic information exchange which begins in 2017 will make it much easier for the authorities to track down tax cheats. Read more. (Subscription required.)
Daily Insolvency News Headlines
Tue., July 22, 2014
The Government is planning new legislation to protect borrowers whose loans were sold to unregulated financial entities in the wake of the crash, the Irish Times reported. Up to 10,000 mortgages are now controlled by institutions which are under no obligation to act in accordance with the Central Bank’s code of conduct on mortgage arrears. The code obliges financial institutions to act within certain parameters when it comes to dealing with problem loans. It also affords borrowers complaints and appeals procedures should they feel unfairly treated. The proposed legislation, which will be brought forward by the end of the year, aims to make companies that purchase loan books subject to the consumer protection rules here. Specifically, it will make ownership of credit, as distinct from the provision of credit, a newly regulated activity which requires Central Bank authorisation. The Government essentially wants to return borrowers to the position in which they were before the loan book was sold. While the legislation is not retrospective it will apply to all owners of loans regardless of the when they were purchased, the Department of Finance said. Read more.
China’s total debt load has climbed to more than two and a half times the size of its economy, underscoring the difficult challenge facing Beijing as it seeks to spur growth without sowing the seeds of a financial crisis, the Financial Times reported. The total debt-to-gross domestic product ratio in the world’s second-largest economy reached 251 per cent at the end of June, up from just 147 per cent at the end of 2008, according to a new estimate from Standard Chartered bank. Such a rapid build-up is far more of a concern than the absolute level of debt, since increases of that magnitude in such a short period have almost always been followed by financial turmoil in other economies. While calculations of the ratio vary depending on exactly what types of credit are included, several other economists agreed with the new figure. Even those with slightly different calculations said the general trend was clear. “China’s current level of debt is already very high by emerging markets standards and the few economies with higher debt ratios are all high-income ones,” said Chen Long, China economist at Gavekal Dragonomics, a research advisory. “In other words China has become indebted before it has become rich.” Read more. (Subscription required.)
Banco Bilbao Vizcaya Argentaria SA won an auction to buy nationalized bank Catalunya Banc SA, Spain's bank-rescue fund said Monday, The Wall Street Journal reported. Spain's second-largest bank by market capitalization offered to pay €1.2 billion ($1.62 billion) for the lender, the bank-rescue fund said. In a surprise move, BBVA beat out rivals Banco Santander SA and Caixabank SA, which submitted binding offers to the rescue fund on Friday, according to people familiar with the sales process. The rescue fund, known as the Frob, said in Monday's statement there were two other bids for Catalunya Banc without naming those bidders. The amount offered for Catalunya Banc is still a fraction of the billions of euros Spain spent to salvage the lender, as mounting defaults on tens of thousands of loans threatened to sink the bank in the wake of the country's real estate bust. Many bankers in Madrid and Barcelona said in recent weeks they had expected Santander and Caixabank, Spain's No. 1 and No. 3 banks, respectively, to be the top contenders. Santander submitted the second-highest bid, people familiar with the sale said. Spain's largest bank offered less than €500 million for Catalunya Banc, these people said. Caixabank asked for additional funds from Spain's bank-rescue fund to take over Catalunya Banc, people familiar with the bid said. BBVA said in a regulatory filing late Monday night in Madrid its offer of €1.2 billion could fall to €920 million if the treatment of some government-guaranteed tax credits, known as deferred tax assets, changes in the future. Read more. (Subscription required.)
The Bundesbank has backed the push by Germany’s trade unions for inflation-busting wage settlements, in a remarkable shift in stance from a central bank famed for its tough approach to keeping prices in check, the Financial Times reported. Jens Ulbrich, the Bundesbank’s chief economist, told Spiegel, a German weekly, that recently agreed pay rises of more than 3 per cent were welcome, despite being above the European Central Bank’s inflation target of below but close to 2 per cent. In an article published on Sunday, Mr Ulbrich said that recent wage trends were “moderate” given Germany’s relative economic strength and low levels of unemployment. His comments echo the views of Jens Weidmann, Bundesbank president, according to a senior central bank official. The push for higher pay underlines the heightened concern among even the most hawkish members of the ECB’s governing council over the eurozone’s low inflation and signs that the region’s fledgling recovery is stalling. On Monday, the Bundesbank acknowledged the German economy was unlikely to have grown at all over the three months to June. The calls for higher wages by Germany’s central bank highlight one of the most puzzling conundrums to befall the eurozone’s economic powerhouse: why, despite record low unemployment, the average German worker’s wage has hardly risen over the past decade. The problem is important for the region as a whole, as economists view a pick-up in spending by Germans as a prerequisite of the eurozone’s economy returning to full strength. Read more. (Subscription required.)
An estimated 114 building and construction-related companies have gone to the wall in Canberra since the start of last year, leaving behind more than $80 million in debts, Australian Securities and Investments Commission data has revealed, The Canberra Times reported. With the downturn in the building, home improvement and renovation sector expected to worsen as public servants remain uncertain about their futures, ACT insolvency specialists say the snowballing "tsunami" of economic pain documented in wind-up notices on the ASIC website won’t end soon. “All things being equal we would generally expect an increase in insolvency appointments during such a period (as this),” Tony Lane, the senior manager for insolvency and reconstruction with accountants Vincents, told Fairfax. He warns "larger and larger entities" are likely to fail as the impact of liquidations and unpaid debt cascades through the sector. The collapse of one company leaving unpaid debts often will push others over the brink. (Businesses) most exposed are those with poor and outdated systems, poor or non-existent cost controls, out-of-date service delivery mechanisms, inefficient work practices and poor cash flow,” Mr Lane said. Michael Slaven, of the insolvency firm Kazar Slaven, said he did not expect the rate of company collapses to increase but he wasn’t expecting it to slow either. Read more.