There are two standards on transparency and the exchange of information for tax purposes:
Automatic exchange of information (AEOI) provides for the automatic exchange of a predefined set of information between tax authorities. The AEOI Standard requires the annual exchange of information on financial accounts held by non-resident individuals and entities in a pre-defined format. The information exchanged includes details about the financial account (e.g. the financial institution maintaining it, the account number and the account balance) and details about the account holder (e.g. their name, address, date of birth and taxpayer identification number).
Implementing the AEOI Standard requires jurisdictions to collect the information each year from their financial institutions (which include banks, hedge funds and investment trusts) and to automatically exchange it with the jurisdictions where the account holder is tax resident (provided the jurisdiction has in place the necessary framework to keep the information confidential and properly safeguarded). The AEOI Standard is therefore built on three key components:
Through these three components the AEOI Standard provides for a powerful tool to help deter and identify offshore tax evasion through holding financial assets abroad.
AEOI requires jurisdictions to have in place the required standards in relation to confidentiality and data safeguards, particularly in relation to the policies and systems, to ensure the information they receive is kept safe. This requires the following components:
The Standard for Automatic Exchange of Financial Account Information, developed by the OECD with G20 countries, represents the international consensus on automatic exchange of financial account information for tax purposes, on a reciprocal basis.
The AEOI Implementation Report provides further details on the implementation of the new standard on the automatic exchange of information (AEOI) on offshore financial accounts. Its contents reflect the situation as at 24 November 2019.
Exchange of information on request (EOIR) is an essential tool for tax authorities worldwide to ensure that all taxpayers pay the correct amount of tax. Under the EOIR Standard, tax authorities can make specific requests to other tax authorities for information that will allow them to progress their tax investigations. The information that could be requested includes accounting records, bank statements and information on the ownership of assets.
Implementing the EOIR Standard requires each jurisdiction to respond effectively to requests they receive from their exchange partners. The EOIR Standard is therefore built around three key requirements:
Once in place and operating effectively in practice, the EOIR Standard provides the foundation for effective international co-operation to tackle offshore tax evasion.
The core function of the Global Forum is to monitor the implementation of the international standards on transparency and the exchange of information for tax purposes and to review the effectiveness of their implementation in practice. To that end, the Global Forum carries out peer review processes in relation to each of its members and non-members that are relevant to its work. This is to ensure that the standards are properly implemented and on the basis of a level playing field.
The monitoring and peer review processes provide assurance to Global Forum members that all jurisdictions are properly implementing the standards and highlight where more needs to be done. The Global Forum has an established peer review process in relation to the EOIR Standard, which is already in its second round. With respect to the newer AEOI Standard, the Global Forum has reviewed the domestic and international legal frameworks in place to implement it and will move to review the effectiveness of its implementation in practice.
All Global Forum members have agreed to have their implementation of the EOIR standard be assessed by peer review. The first round of reviews was conducted from 2010 to 2016. The Global Forum has agreed that all members and relevant non-members should be subject to a second round of review starting in 2016, to ensure continued compliance with and implementation of the EOIR standard.
Issuing ratings to assessed jurisdictions is the last step of the review process. The rating issued is based on the seriousness of the deficiencies identified in the course of the review process and they are accompanied by recommendations to the jurisdictions to improve its legal framework or effectiveness in practice. Ratings can be improved over time when a jurisdiction effectively responds to the recommendations made (and could be downgraded when a step back is identified). Ratings have so far only been issued in relation to the EOIR Standard.
When combined with the publication of the results of the reviews, including the ratings, there is a reputational impact encouraging any recommendations to be addressed. Furthermore, the proper implementation of the standards provides international investors with comfort that the jurisdictions in which they are investing have a sound regulatory framework to ensure tax compliance, with some development banks making their investments conditional on positive outcomes from the Global Forum’s peer review processes. The G20, the European Union and others also use the results of the Global Forum peer reviews when establishing their related policies.
The Global Forum has always provided day-to-day assistance to its members to help them implement the international standards effectively. Over time, more and more developing countries have joined the Global Forum to benefit from transparency and exchange information for tax purposes to tackle offshore tax evasion and increase their revenues.
Fifty-five percent of Global Forum members are now developing countries (88 from 161). The Global Forum has therefore developed a large scale technical assistance programme to ensure its developing country members can fully benefit from its standards. In delivering its programme, the Global Forum collaborates with many of its member jurisdictions and various international organisations and development agencies.
The technical assistance programme is aimed at helping jurisdictions implement the transparency standards, building capacities and a culture of exchange of information and ultimately generating revenues. There are a range of activities that include:
The Global Forum also organises meetings of the Competent Authorities for exchange of information in tax matters. These meetings facilitate practical co-operation amongst all member jurisdictions with the sharing of best practices operationally and the strengthening of relationships amongst the individuals directly involved in operationalising the international standards.
The Global Forum works closely with many organisations and bodies in delivering technical assistance to its members around the world. Our technical assistance projects are directly supported by several countries and organisations.
Regional technical assistance programmes are provided by the Global Forum Secretariat in collaboration with regional organisations. They are essential partners in building trust, long term relationships and capacity for transparency and exchange of information for tax purposes. Programmes are currently being run, or in preparation, for the following regions:
The first regional initiative launched by the Global Forum is the Africa Initiative, which is also therefore its most advanced. This has included significant engagement at ministerial level to ensure political buy-in and sustained momentum. This is reflected in the Yaoundé Declaration, that provides support to the fight against illicit financial flows from Africa. The ministerial engagement in the Latin America initiative is demonstrated by the Punta del Este Declaration, in relation to maximising the effective use of the information exchanged under the international tax transparency standards to tackle tax evasion, corruption and other financial crimes.