With the one-year postponement OECD has granted Morocco’s government, concerned expatriates have ample time to adjust and adequately respond to the financial data exchange scheme.
The Organization for Economic Cooperation and Development (OECD) has approved the Moroccan government’s request to postpone the implementation of a banking data exchange agreement it has signed as part of an OECD program.
But while the government has reassured Moroccan expatriates and residents about the fate of their Moroccan assets, a number of experts have told Moroccan newspaper Medias24 that the story is much more complex.
The government reassures
This week it emerged that Morocco had committed to exchanging financial information of Moroccan nationals and foreigners established in Morocco with their countries of residence or origin starting in September 2021.
According to Medias24, “Morocco has just pushed back the deadline to 2022,” and “the automatic exchange of data will therefore only begin next year but will still cover financial information for the year 2021.”
The outlet’s interpretation is partly based on a reassuring press statement the Moroccan government sent out this week after the news went viral that Morocco would begin to “automatically communicate” the banking data of its diaspora and foreign residents to the tax authorities of third countries by late 2021.
Morocco is one of the countries that joined the Base Erosion and Profit Shifting (BEPS) scheme that the Organization for Economic Cooperation and Development (OECD) has initiated to combat tax avoidance and other “harmful tax practices.”
As it sought to reassure Moroccan expatriates and residents after the reports of “automatic” banking data exchange with third countries made the rounds, Morocco’s tax agency declared that 2021 was “not concerned” by the financial information exchange agreement Morocco signed with the OECD in 2019.
The reports, it maintained, had mischaracterized the terms of the country’s commitment to the OECD’s “BEPS Actions.” Morocco is not bound by any regulations to automatically exchange information for tax purposes during the year 2021, the ministry concluded.
But the statement has not calmed the nerves of Moroccan expatriates with assets in Morocco, with many reported to be looking to empty or close their Moroccan bank accounts.
Just a postponement
Appearing to rise to the defense of the Moroccan government, an OECD official said that while “the movement of panic” among Moroccans concerned with the move is understandable, the issue is global and only seeks to foster international financial transparency.
“We have experienced the same scenario with Turkey or Portugal who also have large diasporas in the world. The exchange of data has created a movement of panic, which is quite normal. But everyone must go through this to achieve global transparency in banking data,” the OECD official told Medias24.
International tax expert Frederic Elbar agreed. But, he told the Moroccan newspaper, Morocco’s government should use the one-year window it now has to more effectively communicate about the meaning of the OECD fiscal transparency scheme for Moroccan expatriates and foreigners with assets in the North African country.
Postponing the implementation of the OECD program does not amount to avoiding a data exchange corporation that is necessary as countries take more steps to foster their economic and financial collaboration, he argued.
“People need to know that we are living in a new era where nothing can be hidden anymore. Morocco has pushed back the deadline to 2022, but cannot play this card forever, at the risk of being blacklisted or put on a grey list of non-cooperative countries for data exchange. We need to tell people what to expect in a clear and educational way and not let the vagueness persist.”
Another explained that there are two aspects to Morocco’s commitment to adapt its financial data legislation to the terms of multilateral agreements signed under the aegis of the OECD.
First, because Morocco had to commit to a specific date, the country initially set the year 2021 as the deadline for the implementation of the OECD agreement. Per the agreement, Morocco should begin exchanging banking data with the other 120 signatories of the OECD’s BEPS Actions by September of this year.
Second, Rabat is bound by a reciprocity principle. Other countries would only grant Morocco access to data on Moroccan citizens and foreign residents in Morocco who hold accounts abroad if it agreed to exchange the data of Moroccans and residents with banking accounts in Morocco.
Speaking of the reciprocity principle, Elbar, the international tax expert, stressed that French, Dutch, Spanish, or Italian authorities will now be able to request banking information on Moroccan expatriates living in their countries.
“These countries have the Moroccan and North African diaspora in their sights. Because they know the mass of accounts and money they hold in their countries of origin and which is not declared in their countries of residence. They are impatiently waiting for the September 2021 deadline to launch a major operation to verify the declarations made by the diaspora,” he said.
In cautiously reassuring comments, Elbar went on to argue that the news should not be a cause for panic or worry. For him, the repercussions of Morocco’s commitment to the OECD program will only be devastating for those with “hidden or undeclared” accounts in Morocco. And even in that case, too, he argued, Morocco’s postponement of the initial deadline gives people ample time to declare their assets.
Taking France as an example – the European country being home to the largest number of Moroccan expatriates – Elbar maintained that the risks will only be very high for those with undeclared assets.
“Holding an account abroad is legal in France. But not declaring it to the tax authorities is not, even if the account only contains 20 euros. The person must therefore pay a fixed fine of 1,500 euros per account and per year. If the person has three undeclared accounts over three years, the fine is 1,500 euros multiplied by 9… And the French tax authorities can ask for details of the accounts over 10 years, which is the period of limitation in force in France. The bill can be very high.”
The only exception to this rule, he explained, is the case of Moroccan expatriates who opened their Moroccan accounts using their Moroccan ID card and their address in Morocco. People in this category are “not considered as [a] non-resident and are not concerned by the exchange of data.” He conceded, however, that these cases are in the minority.
In cases where Moroccan expatriates have sizable assets in Morocco stemming from inheritance or their business activities in the country, the costs of not declaring their wealth to French authorities are much steeper, Elbar noted.
In such cases, those with incomes that are not known to the French administration will have to pay the related income tax plus an increase of 80%, which is almost double the basic tax. More still, if the amount of tax at stake exceeds 100,000 euros, the person risks up to 7 years of imprisonment and 3 million in fines.
No need to empty or close accounts now
With the Moroccan government having been granted its request to postpone the deadline of the OECD operation, Moroccan citizens and residents concerned with the decision have one more year to react accordingly. However, Ebar insisted, emptying or closing their Moroccan accounts is futile and not the wisest thing to do at this time.
“Emptying or closing an account today will be useless, since that train has already left. If in 2022, the French tax authorities request information on the accounts of a person in Morocco, the Moroccan administration must provide the data from January 1 to December 31, 2021. Closing an account in March or April 2021 will therefore be useless, since the existence of the account will appear anyway.”
So what should Moroccan expatriates do?
For Elbar, the best thing those concerned can do is to be proactive in showing good faith to the authorities of their countries of residence. The idea is to declare their assets now rather than wait for the authorities to investigate and discover for themselves.
“Generally, if we take the French case, spontaneous declarations are well received and do not expose the taxpayer to any risk, as a result of the principle of good faith or the right to error. But not declaring foreign accounts and waiting for the tax authorities to investigate and discover their existence exposes the taxpayer to fines, tax increases and several other risks.”