The Organisation for Economic Co-operation and Development (OECD) over the weekend presented to G20 finance ministers plans for a two-pronged attack on tax avoidance and evasion from both companies and individuals.
Complementing its Action Plan on Base Erosion and Profit Shifting by companies, the OECD provided ministers with a proposal to increase international tax cooperation and transparency through the promotion of automatic exchange of information between jurisdictions.
The new single global standard is expected to be endorsed by the G20 which will call on all jurisdictions to commit to its implementation. The new standard, based on a three-tier proposal by the OECD should be operational in 2014.
The proposal provides a definition of the financial information to be exchanged automatically: interest, dividends, account balance and income from certain insurance products. It also includes sales proceeds from financial assets and other income generated by assets or from payments made with respect to the account.
The plan also calls for the development of an operational platform. The OECD points out that for automatic exchange of information to function effectively, the right legal and administrative framework needs to be in place to ensure confidentiality and to avoid misuse of the data transmitted. Common reporting and due diligence rules, supported by compatible technology and software, will be developed in the coming months.
OECD's plans also includes the establishment of a multilateral, legal platform. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters contains strict rules on confidentiality and proper use of information.
More than 70 jurisdictions, including all G20 countries, have so far signed the Convention. Building on this, the report calls on the G20 to support the development of a standardised agreement to allow signatories of the Multinational Convention to opt into automatic exchange of information. Developing such a model agreement could be completed by the end of 2013 with detailed guidance available in the first half of 2014, according to the report.
Work is already underway to ensure that all countries benefit from a more transparent tax environment. This includes, for instance, helping developing countries identify needs for technical assistance and capacity building.