Information against tax dodging

Page 47 

©Reuters

The Tax Justice Network claims that US$21-32 trillion are stashed offshore–the equivalent of the combined GDP of the US and Japan. That only concerns tax havens, and does not include tax evasion or other forms of tax avoidance. The OECD believes that this can be tackled in part through the systematic and periodic transmission of “bulk” taxpayer information collected by the source country to the country of residence concerning income from dividends, interest, royalties, salaries, pensions, and so on. This so-called automatic exchange of information seems to work: Denmark helped 440 of its citizens to remember their foreign income after the tax administration sent them a letter announcing that it received such information from abroad.

More than 40 countries have committed to early adoption of the Standard for Automatic Exchange of Financial Account Information, published in February, committing tax jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions annually. The report sets out what information has to be exchanged, the financial institutions that need to file information, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions (verifying the address of account holders for instance).

To deter dodging the exchange, the financial information to be reported includes all types of investment income, account balances and revenue from selling financial assets. A wide range of financial institutions apart from banks have to report too, including brokers, certain insurance companies, and certain so-called collective investment vehicles–funds that pool money from a number of accounts. The new standard also requires those signing it to look beyond “passive entities” to report on the individuals that ultimately control the money from behind the screen of entities set up to hide where the money is actually going.

The advantages of standardisation are simplification, more effectiveness and lower costs for all stakeholders concerned. Except tax evaders, that is.


Adapted from www.oecdinsights.org

Standard for Automatic Exchange of Financial Account Information: Common Reporting Standard is available online at http://www.oecd.org/ctp/exchange-of-tax-information/Automatic-Exchange-Financial-Account-Information-Common-Reporting-Standard.pdf

©OECD Observer No 298, Q1 2014




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