The Organization for Economic Co-operation and Development published the full version of its new global standard for the automatic exchange of information between international tax bodies on Monday. It calls on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other tax jurisdictions around the world on an annual basis. The Standard for Automatic Exchange of Financial Account Information in Tax Matters will be formally presented to G20 Finance Ministers at their next meeting on September 20-21, 2014 and will be the roadmap furthering the fight against tax fraud and tax evasion. According to the OECD:
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. 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.
The automatic exchange of information is a big step forward in the global fight against offshore tax evasion since it will make it more difficult for evaders to maintain the secrecy surrounding the safe havens where they stash their cash, a scheme they have relied on heavily in the past. Governments have taken the plight against tax evasion as one of their main priorities as a consequence of the global financial crisis. “Today’s launch moves us closer to a world in which tax cheats have nowhere left to hide,” said Angel Gurría, OECD secretary-general.
The OECD also announced that the drive toward greater transparency and better exchange of information is already having a tangible effect on taxpayer behavior: Governments across the world have collected more than €37 billon of tax from secret offshore accounts since 2009. Voluntary disclosure programs have yielded positive results as over half a million taxpayers have voluntarily disclosed income and wealth hidden from their tax authorities. Curbing money laundering and the illegal transfer of money abroad is making strides, yet the road to unfold the large picture is a long one.
The OECD invites public comments on how the framework for voluntary disclosure could be further improved and what particular features might encourage even more taxpayers to come forward and take advantage of such programs. Comments should be sent to WP10@oecd.org no later than 12 September 2014.