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| 2 minutes read

To know CRS is to love CRS... not really

There are some moments in your life as a lawyer when a lightbulb goes on above your head and you think "Hold On?". This paper that I co-authored with Harriet Brown of Old Square Tax Chambers in London and which was published by European Taxation recently, was born from one of those moments. 

So, I'm sat there at my desk mid-Covid pandemic and I'm burrowing into the CRS regulations worrying about this weird definition of "Financial Account", and I suddenly notice this odd sentence:

"in the case of a Financial Institution not described in subparagraph C (1) (a), any equity or debt interest in the Financial Institution, if the class of interests was established with the purpose of avoiding reporting in accordance with Section I."

Well...that's odd. 

There's a purpose test tucked away there. Well what does that mean? 

So, I went to check the Commentary. The Commentary explicitly agrees with this and goes further and carves out the "managed by entity".

This is all technical stuff, and all very fascinating for us tax wonks, but the point is that there was an inconsistency in what things said and how things are done. So, it bothered me. The best way to think things through is to write it down. As my good friend a philosophy professor at Oxford once said "writing is thinking". We need to write to crystallise our thoughts. So I wrote, and once you've done that writing you may as well submit it to be published. Why not? Whats the worst that can happen? And some journals pay you.

The article itself brings up some serious issues, if financial institutions have been overreporting they are open to action under #GDPR, and if that overreporting arises from errors and confusion in the guidance and commentary then any fiduciary or other reporting entity which makes a report which ignores the "Purpose test" i noticed may well find themselves open to action.

You can read my article here

This uncertainty about the definition of “financial account” may encourage over-reporting, which could have serious repercussions for both clients and financial institutions. www.ibfd.org/...

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