AUTOMATIC EXCHANGE OF INFORMATION (AEOI)

Transcription

1 AUTOMATIC EXCHANGE OF INFORMATION (AEOI) Rome, CIAT Workshop October 2015

2 WHAT IS? Exchange of information (EOI): sharing of tax-relevant information between tax authorities. Automatic EOI (AEOI): systematic & periodic bulk transmission of tax relevant information by the source country s tax authority to its counterpart in taxpayer s residence country, without being preceded by a specific request AEOI of financial account information: Jurisdictions obtain information from their financial institutions & automatically exchange this information with other jurisdictions on an annual basis. The exchange is from tax authority to tax authority. 1

3 THE PROBLEM: BANKING SECRECY REGULATIONS POSE A THREAT TO FREE FLOW OF TAX INFORMATION ACROSS BORDERS Offshore tax evasion by individuals a serious problem for developing countries (DC) Revenue lost by DCs from offshore tax evasion is speculated to exceed official development assistance. NGOs estimate that DC revenue lost through individuals holding assets overseas amount to US$156 billion ( The need to improve domestic revenue mobilization and governance and curb illicit financial flows in DCs is clear Estimates vary and are not without controversy but a commonly cited one places illicit flows from DCs at US$539 to US$778 billion annually (Baker, Raymond (Baker 2005), Capitalism s Achilles Heel: Dirty Money and How to Renew the Free Market System. Hoboken, NJ: John Wiley & Sons, 2005) AEOI is one important tool for tackling this AEOI is critical to the risk management process by any country seeking to effectively tax income on a worldwide basis. 2

4 THE THREAT: HSBC SWISS PRIVATE BANK CASE RIGHT TO CONFIDENTIALITY OR ASSISTANCE IN TAX EVASION? Over 106,000 wealthy clients from 203 countries Over USD 100 billion in total value held in these bank accounts HSBC s Swiss private bank provided large, untraceable bricks of cash in foreign currencies and colluded with clients to conceal black accounts from tax authorities (Financial Times, February 10, 2015) Names of current and former politicians from Britain, Russia, Ukraine, Georgia, Kenya, Romania, India, Liechtenstein, Mexico, Tunisia, the Democratic Republic of the Congo, Zimbabwe, Rwanda, Paraguay, Djibouti, Senegal, the Philippines and Algeria, among others The bank repeatedly reassured clients that it would not disclose details of accounts to national authorities, even if evidence suggested that the accounts were undeclared to tax authorities Bank employees also discussed with clients a range of measures that would ultimately allow clients to avoid paying taxes in their home countries 3

5 GLOBAL DEVELOPMENTS & CURRENT STATE OF PLAY United States: FATCA First introduced financial institution reporting requirements regarding US taxpayers EU Early Adopters G20 Endorsed standard on automatic exchange of financial account information Global Forum OECD Developed the Common Reporting Standard (CRS) & Model Competent Authority Agreement Monitor & review implementation of AEOI TA & capacity building for DCs to participate in AEOI Developing Countries? 4

6 AUTOMATIC EXCHANGE OF FINANCIAL ACCOUNT INFORMATION: IMPLEMENTING THE STANDARD 2. Put in place administrative & IT infrastructure to collect & exchange information 1. Translate reporting & due diligence requirements into domestic law 3. Establish legal basis for exchange of information 4. Make use of incoming data for domestic tax administration: data matching & data mining 5. Protect confidentiality & data safeguards 5

7 WHAT COULD AN OPERATIONAL INTERVENTION LOOK LIKE? Beneficial ownership / AML regime (customer due diligence) Tax administration and IT modernisation, including enhancing ability to use information domestically and organizational structure. Building tax personnel expertise Advisory services on legal and regulatory reform 6

8 THE WORLD BANK S ROLE Strengthen capacities of tax administrations in developing countries to use information obtained through AEOI to sharpen capabilities of fighting tax evasion Improve intelligence and risk management Modernize tax administrations by building strong ICT systems Help implement AEOI through upgradation, adaptation of IT systems in tax administrations Provide targeted technical assistance focused on BEPS - transfer pricing and other key international tax issues The goal and the challenge: Building high capacity revenue administrations based on principles of good governance and professional management 7

9 8 Discussion session with delegates.