On 29-30 October 2015, Global Forum members met in Barbados on the subject “Keeping tax transparency high on the agenda of Governments and taking steps to ensure a worldwide level playing field”. As the key global body for ensuring the implementation of the OECD’s Common Reporting Standard (CRS) it has three very important tasks:
1. Reviewing countries’ laws on information exchange;
2. Assessing how effective the information exchange is;
3. Issuing compliance ratings.
Significant progress has been made these past 12 months in getting countries to participate. With Panama and the Cook Islands the latest countries to commit, the total stands now at 96 countries. With these latest commitments all major financial centers are now part of the effort to enhance international tax cooperation. The first countries will start as early as 2017 with exchanging data according to the Common Reporting Standard. The CRS has a lot of similarities to the Foreign Account Tax Compliance Act (FATCA), which is the American equivalent for countries to report to the IRS per 2015.
Besides wanting to put an end to bank secrecy, Global Forum’s push for international data exchange is also focused on helping developing countries. As I’ve mentioned in my previous blog (read here) developing countries struggle immensely with illicit financial flows. In between 2003-2012 they have lost out in excess of $6.6 trillion US dollars in tax revenue. Global Forum is planning on providing technical assistance to developing countries and helping them to maximize the benefits.
While the need of international data exchange is clear and desired, the execution is not done easily and complying with all regulations has a great impact on tax authorities and governments. Tax authorities need a streamlined process and automated technical system that meets international requirements and complies with all stringent regulations. Building this non-core process in-house will most often result in unfavorable results, high cost of maintenance, big cost overruns and increased risk of non-compliance. Underestimating the task at hand can have a big impact on a tax authority. Buying a proven solution that meets all international standards and is already in use in other countries, is the much safer route to choose.
For more information on Global Forum, go to http://www.oecd.org/tax/transparency/