Europe’s five largest countries have signed yesterday an intergovernmental agreement to develop and pilot multilateral tax information exchange.

The UK, France, Germany, Italy and Spain, have agreed to share a wide range of financial information among them following their previous individual agreement with the US government as part of the Foreign Account Tax Compliant Act (FATCA) to comply with strict tax information sharing agreements in order to catch tax US tax evaders.

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The deal ensures that international tax evasion is tackled in a way that minimises costs for both businesses and governments, the group said in a joint statement.

In a joint letter addressed to EU commissioner Algirdas Semeta, the five finance ministers said that "this pilot will not only help in catching and deterring tax evaders but it will also provide a template as to the wider multilateral agreement we hope to see in the due course."

"We would invite other EU member States to join and we hope that Europe can take a lead in promoting a global system of automatic information exchange, removing the hiding places for those who would seek to evade paying their taxes."

Exchequer Secretary to the Treasury, David Gauke said the deal represented the next stage in promoting a new standard in the automatic exchange of tax information. "This builds on the agreements we have reached with the Isle of Man, Guernsey and Jersey and the discussions currently underway with the Overseas Territories," he added.

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The UK signed similar agreement last month with its three crown dependencies, Guernsey, Jersey and the Isle of Man, to increase tax information sharing between those jurisdictions and the British government.