Minister for Finance Michael Noonan has said a new global agreement compelling banks to exchange information on foreign customers will strike an important blow against tax evasion.

Representatives from 51 governments signed an agreement in Berlin’s finance ministry yesterday committing to swapping bank deposit information by 2017.

"The most important tool to prevent fraud and tax evasion is information, and automatic exchange of information ... will be very effective," said Mr Noonan after the signing ceremony, at which he was joined by Josephine Feehily, chairwoman of the Revenue Commissioners .

The signal from Berlin, he said, was for anyone with undeclared income abroad to approach Revenue before the agreement takes effect to avoid interest and fines when the tax authorities contact them.

Mandatory

The agreement was reached under the auspices of the global forum of the Organisation for Economic Cooperation and Development (OECD) and foresees automatic, mandatory transmission of all information on non-citizen bank customers to their home countries.

Information that will be exchanged automatically from September 2017 includes identity, deposit balances, interest and other income on financial products.

German finance minister Wolfgang Schäuble described the arrangement as a pragmatic and effective global answer to a problem of the globalised age: the difficulty of tracking international electronic transfers for tax purposes.

“The aim is to make tax evasion no longer worth it,” he said, describing banking secrecy in signatory countries as “obsolete”. “This sends a signal of transparency and fairness.”

‘Scourge’

Britain’s chancellor of the exchequer

George Osborne

described tax evasion as a “scourge” and urged other countries to sign the agreement.

“Tax evasion is not just illegal, it is immoral,” he said. “You are robbing from your fellow citizens and should be treated as a common thief.”

OECD secretary-general Angel Gurría said that in the time since the work on the agreement had begun, an extra undeclared €37 billion had already been identified for tax purposes.

French finance minister Michel Sapin said the extra income from this agreement would be essential to stabilise public finances, particularly in his home country. Fighting tax fraud was only the first pillar he said: the second pillar was outstanding agreement on cutting tax optimisation by international companies.

At a post-signing press conference, Dr Schäuble and Mr Osborne stressed they were not at odds over the use of “patent box” tax subsidies on companies’ intellectual property research and development.

Dr Schäuble stressed that such subsidies should only be on offer to real companies conducting research. Mr Osborne agreed, saying he was anxious to see intellectual property developed in the jurisdiction where it is taxed.

Mr Noonan said any “knowledge box” system in Ireland would adhere to principles being formulated by the European Commission and OECD.