Automatic exchange of information among States
The tools introduced by the OECD to fight against tax evasion
The automatic exchange of information among States is one of the main tools identified at European level to strengthen measures to combat fraud and tax evasion, thus limiting the phenomena of transferring of profits from high-tax rate countries towards countries with a more favorable taxation level.
In recent years the member countries of the OECD (Organization for Economic Cooperation and Development) and other international organizations, in particular the G20, have being promoted tax cooperation policies for a more effective fight against international evasion through the adoption of three main instruments to encourage the exchange of information among States:
- Common Reporting Standard (CRS) → is a global standard promoted by the G20 and the OECD, which requires, from year to year, for the automatic exchange of information to be provided by the financial institutions in each country. Data collection includes both natural and legal persons. The involved institutions (banks, insurance companies, stockbrokers and asset management companies, trust companies, electronic money institutions and credit card issuers, trusts) must forward the information collected on an annual basis to the their national Financial Administration, which in turn will automatically report the received data to the tax authority in each jurisdiction committed to the CRS;
- Exchange of Information on Request (EOIR) → is an exchange of information implemented between the tax authorities "on request", according to which the requesting State must abide by the agreement between the two States on the exchange of information;
- Convention on Mutual Administrative Assistance in Tax Matters (MAAT) → is a multilateral agreement allowing the exchange of information both on request and automatically. States signatories of the MAAT Convention have agreed to provide to the requesting contracting States the relevant information pertaining to their taxpayers in order to check their tax compliance with the domestic legislation of the requesting State. The most relevant clauses are those concerning the exchange of information on request, assistance for the collection and unavailability of bank secrecy. The agreement has a partial retroactive effect in the sense that, in the case of tax violations with criminal relevance, the Convention requires the Member States to provide administrative assistance to the requesting States also with reference to the three years preceding the entry into force of the Convention.
These instruments are flanked by voluntary disclosure programs whereby the taxpayer can regularize his undeclared foreign capital at any time by paying the due taxes and benefiting from reduced penalties and interests, thus avoiding criminal charges.
The results achieved in the last few years by the member countries are significant; the voluntary disclosure programs and investigative activities have allowed to locate offshore activities amounting to almost 85 billion euro of extra-potential State revenues. It is the on-going common effort of the Member States to ensure greater transparency in reporting procedures and a more equitable and effective international tax system.
Dott. Fabrizio Moscatelli
Dott.ssa Chiara Vurruso
PKF - Studio TCL Tax Consulting Legal
www.studiotcl.com – www.pkf.com
Genova – Milano