Very recently, Thailand has taken two noteworthy steps in combating international tax evasion. The first of these was Thailand’s decision in January 2017 to join the Global Forum on Transparency and the Exchange of Information for Tax Purposes. The second was Thailand’s amendment of the Revenue Code on 1 April to include tax evasion as a predicate offense under the Anti-Money Laundering law. In combination, these two developments represent a resolute commitment by the government to seriously tackle tax evasion head on, and address the negative impact that this evasion has been having on developing countries. These are discussed in more detail below, coupled with a clarion call for action to those individuals and companies with persisting concerns surrounding the extent of their compliance with Thai and international tax reporting obligations.
OECD Global Forum on Transparency
On January 26th of this year, Thailand became the 139th member of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This forum is dedicated to promoting the exchange of information between tax authorities and affirming commitments to adopt sweeping changes in both domestic law and bilateral treaties. These changes are geared towards improved information sharing, automatic data exchange and heightened mutual support in the collection of taxes. By becoming a party to this Forum, Thailand has wholeheartedly committed itself to modernizing its tax laws, tax data collection, and information systems in order to provide more precise information on tax payments, account holdings and other taxpayer details to foreign tax authorities across the globe. This includes information on both individuals and companies alike.
The information that now must be reported bears stark similarities to the information that, from this year on, Thailand has agreed to provide to the United States under the previously signed Intergovernmental Agreement on the implementation of the Foreign Account Tax Compliance Act (FATCA), of which many readers are no doubt aware. This information includes detailed personal and account information of Americans with bank accounts, brokerage accounts, funds accounts and life insurance with Thai financial institutions. While the FATCA project has been ongoing for several years now, participation in this Global Forum widely expands the range of nationalities and countries now subject to these new reporting requirements.
Up to now, approximately 140 countries have also joined FATCA with many already prepared to begin exchanging information as early as this year or 2018. These ‘early adopter’ participants include prominent, well known jurisdictions such as the British Virgin Islands (BVI), the Cayman Islands, the Netherlands, the Seychelles and the UK in 2017, along with several Asian countries such as China, Hong Kong, Indonesia, Japan, Malaysia, Russia and Singapore to follow in 2018. To varying degrees, all of these have agreed to exchange information automatically with each other on any foreign tax payers with financial accounts in their territory. Thailand has not yet set a date in stone for this, although it is expected to begin providing this information by either 2019 or 2020, especially in light of Thailand’s commitments to share similar data with the US from September of this year.
These developments have left some taxpayers with overseas financial accounts understandably concerned about having their financial information reported back to the taxing authority of their native countries. Nonetheless, this reporting should not expose them to additional taxation provided that they continue to fulfill their tax payment and reporting requirements. Only those falling short of their reporting and tax obligations need to be worried. This process has as its objects, the fostering of greater transparency in the international financial system, and the reciprocal denial to would-be tax evaders of any refuge or redoubt in which to hide.
Tax Evasion and Money Laundering
On April 1 of this year, in addition to the reporting anticipated under this project, Thailand made a fundamental stride in support of international tax collection when they enacted the Revenue Code Amendment Act (No 45), recasting tax evasion as a serious and egregious offence for Money Laundering purposes. The significance of this move should not be underestimated. Previously, if the proceeds from tax evasion in a jurisdiction were held in a bank account in a separate country, it became extremely difficult, nigh impossible for the country to which taxes were owed to recover the funds in that account. Under the new rules, if the proceeds of an account appear to be in any way related to tax evasion, in some countries like Singapore, the financial institution holding these funds can be compelled to report the account to the local Money Laundering authorities for action and investigation. This reporting will often happen without the account holder even being aware. Once reported, the account could be subject to seizure by the local authorities.
Under Thailand’s new rules, where the Thai Revenue Department determines that a taxpayer has evaded THB 10 million (USD 300,000) or more of tax, or if this person has fraudulently claimed a refund of THB 2 million (USD 60,000) or more, the Revenue Department will be empowered to forward the case to the Anti-Money Laundering Office (AMLO) for further action. This could involve freezing bank accounts or seizing the funds inside. These extra powers and penalties under the Anti-money laundering provisions will serve as an effective deterrent against tax evasion, further buttressing the prison terms and fines that can already be levied under the Thai revenue code.
It is hoped that these two powerful tools taken together will be effectively deployed by governments around the world to take on the scourge of tax evasion, and tackle the deleterious impact that it wreaks upon lesser developed economies. Those individuals and companies concerned about their tax reporting and compliance history, need to contact a professional advisor to determine their tax risk exposures, and consider how best to enter the fold of full compliance before the authorities begin making serious moves. The wise course of action is to take preventative measures and get one’s house in order, not just wait for the proverbial knock on the door.
Tax Director – Thailand
*The information provided is for information purposes only, and is not intended to constitute legal advice. Legal advice should be obtained from qualified legal counsel for all specific situations