OECD Pushes for Effective Implementation of Tax Standards

The focus of the Global Forum on Transparency and Exchange of Information for Tax Purposes is now shifting - from commitments and agreements to achieving an effective implementation of the standards, says the Organisation for Economic Cooperation and Development (OECD).

 

The OECD says that as of January 20 this year, Asian countries that have substantially implemented the internationally agreed tax standard are China, India, Korea, and Singapore. Jurisdictions that have committed to the internationally agreed tax standard, but have not yet substantially implemented it, include Brunei, Malaysia, and the Philippines.

 

In 2009, more progress toward full effective exchange of information have been made than in the past decade, states the OECD. In the run up to the G20 summit held in London on 2 April 2009, the standards on transparency and exchange of information developed by the OECD were endorsed by all key players, including jurisdictions which had so far been opposed to exchanging bank information. As a result, the standard of information exchange on request, including bank and fiduciary information, is now universally endorsed and the UN has incorporated the OECD standard in the UN Model Tax Convention in October 2008.

 

“What we are witnessing is nothing short of a revolution," says OECD Secretary General Angel Gurría. "By addressing the challenges posed by the dark side of the tax world, the campaign for global tax transparency is in full flow. We have equipped ourselves with the institutional means to continue the campaign. With the crisis, global public opinion’s expectations are high, their tolerance of non-compliance is zero and we must deliver.”

 

The standards of transparency and exchange of information that have been developed by the OECD are primarily contained in the Article 26 of the OECD Model Tax Convention and the 2002 Model Agreement on Exchange of Information on Tax Matters. The standards have been adopted by the G20 Ministers of Finance at a meeting in Berlin (Germany) in 2004, Xianghe (China) in 2005 and by the UN Committee of Experts on International Cooperation in Tax Matters in October 2008. They serve as a model for the vast majority of the 3600 bilateral tax conventions entered into by OECD and non-OECD countries and are the international norm for tax co-operation.

 

The standards require:

• The exchange of information on request where it is “foreseeably relevant” to the administration and enforcement of the domestic laws of the treaty partner.
• No restrictions on exchange caused by bank secrecy or domestic tax interest requirements.
• Availability of reliable information and powers to obtain it.
• Respect for taxpayers’ rights.
• Strict confidentiality of information exchanged.

 

To speed up the process of implementation of tax standards, the OECD is currently pursuing important strategies to help accelerate the development of adequate exchange of information networks.

 

Meanwhile the OECD's Forum on Tax Administration (FTA) recently endorsed a work programme for 2010 which will continue to focus on unacceptable tax minimisation arrangements.

 

FTA commissioners will be examining the range of initiatives used to encourage those taxpayers who have used tax havens to hide their income and gains to come forward to regularise their tax affairs. It will also examine how to best leverage from the recent advances in exchange of information through greater use of joint audits of taxpayers operating in multiple jurisdictions, exploring the linkages between good corporate governance and tax compliance.

 

The outcomes of this work will be discussed at the FTA meeting in Istanbul in September this year.
 

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