The Organisation for Economic Co-operation and Development said it was asked to present the report to the G8 following the “endorsement” by G20 finance ministers of automatic exchange of information for tax purposes becoming “the new standard”.
On Monday and Tuesday this week, the leaders of the G8 countries, the UK, US, France, Germany, Russia, Japan, Italy and Canada, held a summit in Lough Erne in Northern Ireland which was chaired by UK Prime Minister David Cameron. Cameron has made tackling tax evasion and “aggressive tax avoidance” a priority for his presidency of the G8.
Introducing the report, the OECD said: “As the world becomes increasingly globalised it is becoming easier for all taxpayers to make, hold and manage investments through foreign financial institutions, something that not long ago was accessible only to a select few.
“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, OECD and nonOECD, small and large, developing and developed. Cooperation between tax administrations is critical in the fight against tax evasion and a key aspect of that cooperation is exchange of information.”
The four steps suggested by the OECD in its report are:
- Enacting broad framework legislation to facilitate the expansion of a country’s network of partner jurisdictions
- Selecting the legal basis for the exchange of information
- Adapting the scope of reporting and due diligence requirements and coordinating guidance
- Developing common or compatible IT standards
The OECD also set out potential timeframes for each step and said much of this work is already underway.
The organisation added “more and more jurisdictions” are joining the Convention on Mutual Administrative Assistance in Tax Matters – which provides a legal basis for automatic exchange of information and underlines the role of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, which has been mandated by the G20 to monitor implementation of the new standard.
G8 commitments
In a closing joint communication published on Tuesday, the G8 leaders said: “We are committed to open economies, open societies and open governments as the basis of lasting growth and stability. We have today agreed concrete steps to play our part in ensuring a safe and prosperous world.”
Specifically on tax, the G8 said it is committed to “establish the automatic exchange of information between tax authorities as the new global standard, and will work with the OECD to develop rapidly a multilateral model which will make it easier for governments to find and punish tax evaders”.
Furthermore, on tax avoidance, the G8 said it “supports the OECD’s work to tackle base erosion and profit shifting”, adding that it will “work create a common template for multinationals to report to tax authorities where they make their profits and pay their taxes across the world”.
In addition, the G8 said it “will support developing countries to collect the taxes owed them, with access to the global tax information they need”.
US hypocritical
Neil Chadwick, technical manager at Royal London 360°, said: “Financial services companies around the world are waiting to see how far all of this will really go once the politicians have stopped puffing out their chests on tax avoidance and find something else to get involved with.
“The majority of the OECD report is simply trying to expand/refine US FATCA to be the global standard and its useful in its comments about there needing to be a fixed set of IT requirements/report requirements to reduce the burden on reporting institutions.”
“I still find the US support for global tax compliance somewhat hypercritical as not once I have read that Delaware is going to be closed down or that they are going to have a central registry for beneficial owners. In fact I read recently that some US financial institutions were taking legal action against the IRS due to the fact that as the IGA’s were going to be reciprocal, they predicted a large loss of business. It does seem to be the case that the smaller jurisdictions are being picked on unfairly as the larger countries such as the US and the UK will find far more instances of non-tax compliance occurring on their own doorsteps.”
