International Exchange of Financial Information
Offshore tax evasion remains a serious problem for countries and jurisdictions worldwide, with supposedly vast amounts of funds deposited abroad and sheltered from taxation when taxpayers fail to comply with obligations in their home countries.
In responding to a mandate from G20 leaders to reinforce action against tax avoidance and evasion and inject greater trust and fairness into the international tax system, the OECD recently signaled a possible move to a new global standard for the automatic exchange of information between tax authorities worldwide. This is in contrast with existing arrangements whereby one tax authority has to request the assistance of another taxation authority in respect of a particular person or business.
Developed by the OECD together with the G20 countries, the standard calls on jurisdictions to obtain information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions that need to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.
Presenting the new standard, OECD Secretary-General Angel Gurría said: "This is a real game changer. Globalisation of the world's financial system has made it increasingly simple for people to make, hold and manage investments outside their country of residence. This new standard on automatic exchange of information will ramp up international tax co-operation, putting governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion."
The OECD is expected to 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.