Yesterday’s “massive” signing in Berlin of an agreement implementing the new OECD standard on automatic exchange of information is a “game changer” in the fight against tax evasion, said OECD secretary-general Angel Gurría.
The standard was endorsed by 51 jurisdictions including the UK, the British Virgin Islands, Cayman Islands, the Isle of Man and Jersey.
George Osborne, the chancellor, said: “Today marks a negotiating triumph for Britain, and our close ally Germany, in the fight against tax evasion.” He tweeted: “Tax evasion is not just illegal it's immoral. People evading tax should be treated same as common thieves. This agreement helps us tackle them.”
Gurría said: “In May, the G20 finance ministers and central bank governors endorsed the Common Reporting Standard for automatic exchange of tax information. More than 90 jurisdictions have now publicly committed to implementation. Over 50 of these have set out a specific timetable leading to the first automatic information exchanges in 2017. This is a game changer!”
International collaboration on tax matters would help governments regain public trust, and the benefits of tax transparency outweighed the costs, he added. “To give just one telling example, even though the standard is not yet in force, 25 countries have already identified additional revenue of €37bn euros from voluntary disclosure programmes and other initiatives to combat offshore evasion. This message must be broadcast loud and clear to policymakers, to the press, to influential voices in adhering and non-adhering countries so the benefits of transparency reach the broadest audience.”
Algirdas Šemeta, European commissioner for taxation, said agreement on a global standard signalled a new step towards greater transparency. “The European Union has been a pioneer and a leader in the use of automatic exchange of information to prevent tax evasion,” he said. “It has been advocated by the Commission since 2001 and has been applied by EU member states under the directive on the taxation of savings income since 2003.”
HM Treasury said “unprecedented” levels of information, including account balances, interest payments and beneficial ownership, would be shared with the UK from countries across the world.
“This will increase the ability of HMRC to clamp down on tax evaders, providing HMRC with the details of billions of pounds of assets held overseas by UK taxpayers.”
The Treasury said 57 countries and jurisdictions, known as the early adopters group, had now committed to a common implementation timetable. That group said in a joint statement: “All of us are on track to deliver on our commitment to first exchange of information in 2017 which will include reports on accounts open at the end of 2015.”
The multilateral competent authority agreement specifies “what information will be exchanged and when”, the OECD said.
‘Race against the clock’
Financial institutions doing business in signatory jurisdictions faced “complex new due diligence and automatic reporting requirements”, said Tom Aston, financial services tax partner at KPMG in the UK.
He anticipated a “race against the clock for governments and financial institutions to meet the “ambitious” timetable.
Derek Scott, the firm’s head of tax investigations, said: “HMRC will receive an unprecedented level of personal financial information on UK residents from overseas jurisdictions, including details of personal bank accounts and on entities they are connected with such as trusts.”
He added: “We support any action undertaken that assists with clamping down on tax evasion … It is also important, however, to distinguish between tax evasion and those UK taxpayers who hold overseas assets for perfectly legitimate reasons.”
Forum on Tax Administration
Last week in Dublin the heads of tax administrations from 38 countries agreed that “ever greater co-operation” will be necessary to implement the results of the base erosion and profit shifting (BEPS) project and automatic exchange of information, the OECD reported.
Participants in the meeting of the OECD Forum on Tax Administration said in a communiqué: “We will invest the resources necessary to implement the new standard on automatic exchange of information and use the information to counter tax evasion wherever it arises, while protecting taxpayer confidentiality and ensuring the proper use of the information.”