Out-Law News | 23 Jul 2014 | 2:30 pm | 2 min. read
The ‘Standard for Automatic Exchange of Financial Account Information in Tax Matters’, launched by the OECD on 21 July, calls on governments to obtain detailed account information from financial institutions and share the information automatically with other jurisdictions each year.
The standard, developed by the OECD at the request of the G20 group of the world’s largest advanced and emerging economies, will be formally presented to G20 finance ministers next September.
OECD secretary-general Angel Gurria said the organisation’s message to the G20 “will be clear and simple... the automatic exchange of information standard is ready for implementation”.
Gurria said: “The G20 mandated the OECD to work with G20 and OECD countries and stakeholders toward the development of an ambitious information exchange model that would help governments fight tax fraud and tax evasion.” He said the launch of the standard “moves us closer to a world in which tax cheats have nowhere left to hide”.
According to the OECD, “as the world has become increasingly globalised it is easier for all taxpayers to make, hold and manage investments through financial institutions outside of their country of residence”.
The OECD said: “Vast amounts of money are kept offshore and go untaxed to the extent that taxpayers fail to comply with tax obligations in their home jurisdiction. Offshore tax evasion is a serious problem for jurisdictions all over the world... countries have a shared interest in maintaining the integrity of their tax systems.”
The standard provides for annual automatic exchange between governments of financial account information, including balances, interest, dividends, and sales proceeds from financial assets, reported to governments by financial institutions and covering accounts held by individuals and entities, including trusts and foundations.
More than 65 countries and jurisdictions have already publicly committed to implementing the standard, while more than 40 have committed to making the first automatic information exchanges in 2017. This includes a group of OECD and non-OECD countries which have adhered to the OECD declaration on automatic exchange of information in tax matters (7-page / 1.12 MB PDF) as well as a group of ‘early adopters’.
The OECD said more jurisdictions are expected to commit to implement the standard in the run up to the Global Forum Transparency and Exchange of Information for Tax Purposes hosted by the German finance ministry in Berlin next October.
At the Berlin meeting, a signing ceremony is expected to be held for “a new multilateral agreement that activates automatic exchange once legislation and other conditions are in place,” the OECD said. “Assistance will be available to support less-developed countries, so they benefit from this move towards a more transparent tax environment, and international organisations are ready to cooperate to support these countries.”
However, the OECD said moves by international bodies to encourage greater transparency are already showing signs of success.
The OECD said: “Analysis of voluntary disclosure programmes since 2009 shows that more than half a million taxpayers have voluntarily disclosed income and wealth hidden from their tax authorities. Countries have identified more than €37 billion from voluntary disclosure programmes which OECD encourages countries to consider.” The OECD said it is also updating its own policy guidance in this area issued 2010, ‘Offshore voluntary disclosure: comparative analysis, guidance and policy advice’ (62-page / 2.28 MB PDF).