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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:
(i) 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.
(ii) 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.
(iii) 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.
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.
Action Plan on Base Erosion and Profit Shifting
Speaking about the OECD Action Plan, UK Prime Minister David Cameron said: "This report shows how taxpayers, governments and businesses all suffer when some companies manipulate the tax system to avoid paying their fair share of taxes. And it highlights how much we still have to do to bring the international tax system, conceived back in the 1920s, into the 21st century. That’s why I put the issue at the heart of our G8 agenda.
I’m delighted that the OECD have risen to the challenge we set at Lough Erne: committing to set out by next September new rules for a common template that will require multinationals to disclose where they earn their profits and where they pay their taxes. At the G20 Summit in St Petersburg in September, I will call on fellow leaders to get behind this action plan to ensure that we break down the walls of corporate secrecy, once and for all, and that all companies pay their fair share.“
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