The declaration commits the signatories to implement a new single global standard on automatic exchange of information. The OECD set out its plans for a new global 'common standard of reporting' for the automatic exchange of tax information between countries earlier this year. The common reporting standard will require financial institutions and brokers to report information to authorities in their own jurisdictions, and this information will in turn be passed on to other relevant countries automatically. The standard was developed by the OECD and the G20 group of leading global economies.
The countries which endorsed the declaration were the 34 OECD member countries, along with Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa. Switzerland, along with the UK, is a member of the OECD.
Many of the signatories had already previously agreed to automatically exchange information, but Switzerland and Singapore are among those who had not. The UK's Crown Dependencies (Jersey, Guernsey and the Isle of Man) and Overseas Territories (including Gibraltar and the Cayman Islands) have previously agreed to exchange information.
Tax expert Jason Collins of Pinsent Masons, the law firm behind Out-law.com said "with the Crown Dependencies, Overseas Territories, Liechtenstein and Luxembourg already in, the addition of Switzerland and Singapore, which was once unfairly dubbed the Switzerland of Asia, has created a tipping point. There are fewer and fewer places to hide wealth from the taxman - and all eyes now turn to other popular financial centres such as Hong Kong and Dubai."
It was announced last month that a total of 44 countries including the UK, France, Germany, Italy and Spain have committed to early adoption of the new standard as part of an initiative first announced last year. These 'early adopters' will begin to automatically exchange information with each other from 2017 in respect of data collected from 31 December 2015.
It is not clear whether Singapore or Switzerland will become early adopters. The declaration signed this week contains no timescale, although the preamble does welcome "the commitments already made for early adoption of the new single global standard by a large number of countries and jurisdictions". The OECD said that "more than 60 countries and jurisdictions have now committed to early adoption of the standard, and additional Global Forum members are expected to join this group in the coming months".
The OECD will deliver a detailed commentary on the new standard, as well as "technical solutions to implement the actual information exchanges", during a meeting of G20 finance ministers in September 2014.
The move to an international standard on automatic sharing of information has been accelerated by the Foreign Account Tax Compliance Act (FATCA), a US law creating a new tax information and reporting and withholding regime, designed to gain information about US persons holding assets outside the US.
It was also announced this week that Singapore and the US have substantially concluded discussions on an Intergovernmental Agreement (IGA) that will facilitate compliance with FATCA by Singapore-based financial institutions.
IGAs are designed to avoid the problems compliance with FATCA presents for non-US financial institutions because the information disclosure requirements under FATCA are not necessarily permitted under local data protection, confidentiality and bank secrecy laws. IGAs allow FATCA compliance to take place at national level so that financial institutions meet their FATCA obligations by disclosing information about non-resident accountholders to their local tax authority, which then provides the information automatically each year to the US authorities.
The Monetary Authority of Singapore (MAS) reported that Singapore and the US have initialled a Model 1 IGA, which they expect to sign in the second half of 2014. It is intended that Singapore-based financial institutions will have until 31 December 2014 to register as a Foreign Financial Institution within a Model 1 IGA jurisdiction and obtain a Global Intermediary Identification Number at the US IRS’ online FATCA registration portal. This will ensure that there is no FATCA-related withholding tax on payments made to them from the US.