OECD Secretary General has issued an updated progress report to the G20 Finance Ministers by the Global Forum on Transparency and Exchange of Information for Tax Purposes. January 2016 marks the beginning of the Global Forum’s new five year mandate. It also marks the start of a fundamental change in the relationship between financial institutions and tax administrations. The new international standard on automatic exchange of information (AEOI Standard), or the Common Reporting Standard (the CRS), is now up and running. Since 1 January, financial institutions in jurisdictions that committed to first exchanges of financial account information in 2017 have started to collect a great deal of information on new account holders, including account numbers, account balances and tax identification numbers. From 2017 onwards, this information will begin to be exchanged automatically with countries of residence of the account holders. The momentum will increase throughout 2018 as another wave of countries gives effect to their commitments to begin first exchanges bringing bank secrecy for tax purposes to its final end.
In addition to developments in relation to AEOI, this report provides a brief update on the Global Forum’s work on exchange of information on request (EOIR), technical assistance to developing countries and progress by members in signing the multilateral Convention on the Mutual Administrative Assistance in Tax Matters (the Convention).
The Global Forum’s peer review process evaluates jurisdictions’ compliance with the standard for Exchange of Information on Request (EOIR). Reviews take place in two phases: Phase 1 reviews examine the legal and regulatory framework; Phase 2 reviews look into the implementation of this framework in practice. In both cases recommendations are made where appropriate. As of February 2016, the Global Forum has finalised Phase 1 reviews of 120 jurisdictions and assigned compliance ratings for a total of 86 jurisdictions after completion of their Phase 2 reviews. The overall ratings show that 22 jurisdictions are rated “Compliant”, 52 jurisdictions “Largely Compliant”, and 12 “Partially Compliant”
The new frontier for the Global Forum is the effective global implementation of the AEOI Standard. Following the endorsement of the standard by G20 Leaders in 2014, and the G20’s subsequent commitment to commence automatically exchanging information in 2017 or 2018, almost all financial centres and developed jurisdictions matched the commitments made. There are currently 96 jurisdictions committed to commence exchanging financial account information automatically by 2017 or 2018.
The multilateral Convention on Mutual Administrative Assistance in Tax Matters (the Convention), developed by the OECD and the Council of Europe, which has always provided for automatic exchange of information, has taken on increasing importance following the G20’s call for automatic exchange to become a new international standard for the exchange of tax information, and the subsequent development of the standard. In 2015, the G20 Finance Ministers asked the Global Forum to report on progress made by its members in signing the Convention. The number of participating jurisdictions in the Convention has now reached 94, including 3 non-members. The Convention is already in force in 72 of these jurisdictions.
In an increasingly globalised world, developing countries are the easiest victims of international tax evasion which undermines their growth potential, development and the welfare of their population by directly affecting resource mobilization. The Global Forum aims to ensure that all of its members can benefit from improvements in global tax transparency. This is not beyond the capability of even the least developed country. Building on experience gained over the last five years and with the continued support of its members, the Global Forum has greatly expanded its assistance to developing country members, who now constitute more than half its membership.