DEVELOPMENTS IN EXCHANGE
OF INFORMATION
Grace Perez-Navarro
Deputy Director
Centre for Tax Policy and Administration
9 November 2012
INFORMATION EXCHANGE
ON REQUEST:
WORK ON ARTICLE 26
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Why Update Article 26 and its Commentary?
• Regular reviews and updates are required to take
into account recent developments and to reflect
current country practices:
2005 update: Addition of paragraphs 4 and 5 to clarify that
a request cannot be denied on the basis of
domestic tax interest or bank secrecy
2012 update: Released by OECD on 18 July 2012
• Consensus of all members, no reservations
or observations
• Updated Article 26 and its commentary can be
found on the OECD website:
http://www.oecd.org/ctp/exchangeofinformation/latestdocuments/120718
_Article%2026-ENG_no%20cover%20(2).pdf
2012 Update: Highlights
• Change to the text of Article 26
– Article 26(2) was amended to allow information received
for tax purposes to be used for non-tax purposes
provided:
• Such use is allowed under the laws of both States and
• The competent authority of the supplying State authorizes
such use
– Supports a “whole of government” approach and is
directly linked with the OECD’s work in connection with
the “Oslo Dialogue”
2012 Update: Highlights
• Clarifications to the Commentary
– Language describing the application of Article 26 to a
group of taxpayers
– Clarifications on the meaning of “foreseeably relevant”
and “fishing expeditions”
– Optional language providing for default standard time
limits
Group Requests
• Standard of “foreseeable relevance” can be met for a group
of taxpayers that are not individually identified
• 3 requirements:
1.
Detailed description of group and facts and circumstances that led
eto request;
2.
Explanation of applicable law and why there is reason to believe that
the taxpayers in the group have been non-compliant with that law
supported by a clear factual basis
3.
A showing that the requested information would assist in
determining compliance by the taxpayers in the group
• Usually, although not necessarily, a third party will have
actively contributed to the non-compliance of the taxpayers in
the group
Default Standard Time Limits
• Optional language set out in paragraph 10.4 of
the Commentary
– Default 2 months/6 months to provide information but
competent authorities may agree to different periods
– Exchange still in accordance with Article 26 if the
information is provided after the time limits
WORK ON
AUTOMATIC EXCHANGE
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From on request to automatic
exchange?
The international standard is exchange of
information on request,
BUT
there is growing interest to engage in
automatic exchange of information.
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G20 (Mexico, 2012)
• G20 Ministerial, 26 February 2012:
“We call for an interim report and update by the OECD on necessary steps
to improve comprehensive information exchange, including automatic
exchange of information and, together with the FATF, on steps taken to
prevent the misuse of corporate vehicles and improve interagency
cooperation in the fight against illicit activities.”
• G20 Leaders Declaration, 19 June 2012:
“… We welcome the OECD report on the practice of automatic information
exchange, where we will continue to lead by example in implementing this
practice. We call on countries to join this growing practice as appropriate
and strongly encourage all jurisdictions to sign the Multilateral Convention
on Mutual Administrative Assistance.…”
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G20 (Russia 2013)
G20 Ministerial (19 April 2013)
•
14. “….In view of the next G20 Summit, we also strongly encourage
all jurisdictions to sign or express interest in signing the
Multilateral Convention on Mutual Administrative Assistance in
Tax Matters and call on the OECD to report on progress. We
welcome progress made towards automatic exchange of
information which is expected to be the standard and
urge all jurisdictions to move towards exchanging
information automatically with their treaty partners, as
appropriate. We look forward to the OECD working with G20
countries to report back on the progress in developing of a new
multilateral standard on automatic exchange of
information, taking into account country-specific characteristics.
The Global Forum will be in charge of monitoring.”
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The Influence of FATCA (1)
• A key catalyst for automatic exchange of information has been the
FATCA legislation enacted by the United States in 2010.
• FATCA effectively requires foreign financial institutions around the
globe to report account details of their U.S. customers to the U.S. tax
administration.
• Recognising the important legal and cost issues of this approach, the
US developed together with five other countries (France,
Germany, Italy, Spain and the United Kingdom) a model for
the intergovernmental implementation of FATCA (Model FATCA
IGA).
• The Model FATCA IGA provides for the implementation of FATCA
through reporting by financial institutions to their local tax
authorities, which then exchange the information on an automatic
basis with the U.S. tax authorities.
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The Influence of FATCA (2)
• The Model FATCA IGA is not only becoming a preferred
route for the implementation of FATCA, it can also serve
as a template for a common model for automatic
exchange of information.
• The Model FATCA IGA itself contains a commitment to
work with interested countries, the OECD and where
appropriate the EU on adapting the terms of the Model
FATCA IGA “in the medium term to a common model
for automatic exchange of information, including the
development of reporting and due diligence standards.”
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The Influence of FATCA (3)
• 9 April 2013, the Ministers of the same five members that developed
the FATCA intergovernmental agreements with the US announced
their intention to exchange FATCA type information amongst
themselves, in addition to exchanging information with the United
States.
• 13 April 2013, Belgium, the Czech Republic, the Netherlands,
Poland, and Romania also expressed interest in joining this
approach.
• 6 April 2013, Luxembourg indicated a willingness to provide bank
information automatically to other EU member countries (within
the scope of the EU Savings Directive) and Austria is also
considering.
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EU and Automatic Exchange
• Within the European Union member states exchange information
automatically on interest income within the meaning of the
Savings Directive. Only Luxembourg and Austria still levy a
withholding tax instead of exchanging information during a
transitional period. There is also an amending proposal to the
Directive which however has not yet been adopted.
• The revised Directive on Administrative Cooperation in the Field of
Taxation introduces automatic exchange of information from 1
January 2015 on five categories of income and capital based on
available information (income from employment, director's
fees, life insurance products not covered by other Directives,
pensions, ownership of and income from immovable
property).
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Work on automatic exchange
• The OECD has been active in facilitating automatic
exchange for the past 20 years
– Created legal framework, developed technical standard on
format (STF) [which was used by EU to develop FISC 153],
developed guidance, provides training, etc.
– 1997 TIN recommendation
• OECD Report published on 24 July 2012:
“Automatic Exchange of Information: What it is, How it
works, Benefits, What remains to be done”
http://www.oecd.org/ctp/exchangeofinformation/AEOI_FINAL_with%20cover_WEB.pdf
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Work on automatic exchange –
Legal basis
• Exchange of information provision of a double
taxation convention based on Article 26 of the OECD
or UN Model Convention,
• Article 6 of the Convention on Mutual Administrative
Assistance in Tax Matters, or
• For EU member countries, domestic laws
implementing EU directives which provide for
automatic exchange.
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Work on automatic exchange –
The End-to-End Process: Sending Country
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Work on automatic exchange –
The End-to-End Process: Receiving Country
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Work on automatic exchange –
What does the work on automatic exchange show?
• Widespread use both within Europe and outside
• Effective compliance tool, for example it can:
– Provide timely information on an investment return or the
underlying capital sum
– Help detect cases of non-compliance even where tax
administrations have had no previous indications of noncompliance
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Widespread use of automatic exchange
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Work on automatic exchange –
What still needs to be done?
• 8 Key components in successful automatic exchange
From the perspective of the receiving country:
1.
What – Defining scope of income / transactions to cover.
2.
Who – Defining the information to capture regarding the
taxpayer / beneficial owner.
3.
Quality – Ensuring data quality; e.g. data validation, TIN
verification, general due diligence standards.
4.
When – When to receive the information.
5.
How to exchange – The format to use, encryption and
transmission system.
6.
How to use – Risk assessment, matching, compliance action.
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Work on automatic exchange –
What still needs to be done?
• 8 Key components in successful automatic exchange
From the perspective of the sending country:
7.
Confidentiality – Keeping information protected both in law
and in practice.
8.
Reciprocity, acknowledgement and feedback.
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Current OECD work
• As automatic exchange of information becomes a growing practice,
and with the G20 support for a multilateral implementation in
this domain, the OECD has redoubled its efforts to address the
remaining challenges and to offer, to all interested countries, a
standardized, secure and effective system of automatic
information exchange.
• Working with partner countries (including Argentina, Brazil, China,
India, the Russian Federation and South Africa), the OECD is
advancing rapidly in the development of a common model for
reporting and automatic exchange of certain account
information held by financial institutions, including due diligence
rules, reporting formats and secure transmission methods. The goal
of this work is to maximise compliance benefits for residence
countries, reduce costs for financial institutions and provide
all necessary safeguards through the development of one
standard
than
a proliferation of different ones).
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Tax Policy and
Administration
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Current OECD work
• The goal of this work is to maximise
compliance benefits for residence
countries, reduce costs for financial
institutions and provide all
necessary safeguards through the
development of one standard (rather than
a proliferation of different ones).
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Want to know more?
For more information:
www.oecd.org/ctp/exchange-of-taxinformation/automaticexchangeofinforma
tionreport.htm
www.oecd.org/ctp/eoi/mutual
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