In an effort to crack down on tax evasion the OECD developed what it calls a “New single global standard for the automatic exchange of information between key authorities worldwide.” The standard was approved by the OECD council on 15 July 2014 and is expected to result in an elimination of the secrecy surrounding some banking transactions as it relates to tax matters.
The new standard has been endorsed by more than 60 countries or jurisdictions including the United States, United Kingdom, European Union and Canada and other major jurisdictions already committed to implementation.
The standard requires detailed account information to be provided to governments by financial institutions. The information obtained from the financial institutions will be automatically exchanged with other jurisdictions.
The standard builds on the foundation established by the US Foreign Account Tax Compliance Act (FATCA) and incorporates all types of investment income and proceeds from the sale of financial assets. Entities required to report include banks, brokers, some investment vehicles and some insurance companies. The standard is also expected to include reporting on the ultimate controllers of passive entities.
The OECD also has also established a steering committee to focus on aggressive tax planning. There work is aided by an online directory of scheme types detected by governments and the legal provisions being exploited. According to the OECD:
“The purpose of the directory is to enable member countries to better and more quickly understand new schemes, facilitate their detection, adapt risk management strategies and identify successful legislative and administrative countermeasures.”
While taxpayers around the world are busy trying to find new ways to avoid or evade taxes, governments are collaborating more and more in an effort to solve their common problem of lost tax revenue. It is natural to anticipate that all these measures will produce additional burdens for compliant taxpayers but one can only hope that this will be offset by a reduction of the tax burden which could be made possible by broadening the tax base through these new measures.