Tax transparency takes another step forward

In a boost for international efforts to strengthen co-operation against offshore tax evasion, seven new countries, Australia, Canada, Chile, Costa Rica, India, Indonesia and New Zealand, have joined a multilateral competent authority (“MCA”) agreement to exchange information automatically under the OECD/G20 standard. The MCA implements the Standard for Automatic Exchange of Financial Information in Tax Matters, developed by the OECD and G20 countries and presented in 2014.

The Standard and the MCA

The Standard, developed in response to the G20 request and approved by the OECD Council on 15 July 2014, calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. The MCA specifies the details of what information will be exchanged and when, as set out in the Standard. The MCA consists of 8 sections: Section 1 contains the definitions of the terms used in the agreement. Section 2 sets out the information to be automatically exchanged, including the name, address, and date and place of birth of an individual account holder and details of any company or other legal entity holding an account, together with the total gross amount of interest paid or credited to the account during the calendar year or other appropriate reporting period. Section 3 sets out the timing and method of the automatic exchange of information. Section 4 outlines how the parties to the agreement will work together to ensure compliance with the agreement. Section 5 sets out provisions to ensure confidentiality and the safeguarding of the data. Section 6 sets out the process to consult on ensuring the smooth operation of the agreement and to amend the agreement. Section 7 sets out the subsequent notifications required under the agreement and how the MCA is then subsequently brought into effect. Section 8 sets out the role of the Secretariat.

Conclusion

In tax terms, there is no doubt that the world is becoming a smaller place. This is because the international community all share a common desire to capture tax revenues and stem tax losses arising from unauthorised flows of monies offshore. Since the Berlin signing ceremony on 29 October 2014, a total of 61 jurisdictions have signed the MCA. That number is likely to increase.

 

Levy and Levy – the tax investigations and resolution specialists in London and Tunbridge Wells.