OECD reports new developments in tax information exchange

OECD Secretary-General Angel Gurría has presented a report to G20 Finance Ministers and Central Bank Governors that highlights measures to ensure that all taxpayers pay their fair share.

The report covers three strategic initiatives:

• Progress reported by the Global Forum on Transparency and Exchange of Information for Tax Purposes including the upcoming ratings of jurisdictions’ compliance with the Global Forum’s standards on exchange of information on request;
• Efforts by OECD to strengthen automatic exchange of information;
• Latest developments to address tax base erosion and profit shifting, a practice that can give multinational corporations an unfair tax advantage over domestic companies and citizens. 

Global Forum on Transparency and Exchange of Information for Tax Purposes: How do countries rate

The Global Forum, set up in 2000 to agree global tax standards, now has 119 member countries and jurisdictions. Since 2009, when the G20 called for effective implementation of the internationally agreed standard of information exchange, the Forum has published 100 peer review reports. Most countries have completed the first phase of the reviews which looks at legal frameworks. Fourteen are not moving to the second phase due to deficiencies in their legal frameworks. After it completes a set of Phase 2 reviews, looking at effectiveness of the information exchange practices, the Global Forum will start rating countries’  implementation of the standards on the basis of a four-tier classification system: "compliant,”  “largely compliant,” “partially compliant” and “non-compliant”. The results of the ratings exercise for the first set of reviews will be completed by year end, with the allocation of overall ratings to approximately 50 tax jurisdictions.

Commending the Global Forum’s achievements, Mr. Gurría  noted that, “Now that the tools exist to investigate cross-border tax evasion, all countries must use them to the full. ” 

Automatic Exchange of Information: the next step

Commenting on new OECD work to  develop a common model for automatic exchange of bank information, Secretary-General Gurria said:   “The political support for automatic exchange of information on investment income has never been greater.  Luxembourg has changed its position and the US FATCA legislation is triggering rapid acceptance of automatic exchange and propelling European countries to adopt this approach amongst themselves.  In response to the G20 mandate to make automatic exchange or information the new standard, the OECD is developing a standardised, secure and effective system of automatic exchange.” 

The report identifies the Multilateral Convention on Mutual Administrative Assistance in Tax Matters as the ideal legal instrument for multilateralising automatic exchange of information. The Convention provides governments with a variety of means to fight offshore tax evasion and ensure compliance with national tax laws, while respecting the rights of taxpayers. Over 50 countries have either signed or committed to sign; more are expected to sign the Convention at a ceremony to be held at OECD headquarters on 29 May.

Addressing Base Erosion and Profit Shifting

As Base Erosion and Profit Shifting undermine tax revenues and the fairness of the tax system, the OECD has strengthened its work to put an end to international double non-taxation. The report also provides an update on the OECD’s work on Base Erosion and Profit Shifting noting that an Action Plan will be delivered to the Moscow meeting of G20 Finance Ministers meeting in July 2013.