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Global Forum: exchange of information on request and automatic exchange of information

The G20/OECD Global Forum on Transparency and Exchange of Information for Tax Purposes is a multilateral framework implementation of transparency and exchange of information for tax purposes. The Global Forum currently has 139 members, who commit to implement an international standard on exchange of information on request. In 2016, eight new jurisdictions joined the Global Forum. The standard currently being applied following the end of the first round of reviews in 2016, is that of exchange of information on request. The Global Forum evaluates the compliance of its member jurisdiction to its international standard, labelling them “compliant”, “largely compliant”, “partially compliant” or “non-compliant”. Failure to implement the standard will result in being labelled “non-compliant”. This standard may have negative international repercussions. Out of the 139 members of the Global Forum, 5.4 per cent are non-compliant, 12.1 per cent are partially compliant, 77.7 per cent are largely compliant, and 22.2 per cent are compliant. It has been targeting the exchange of information for tax purposes, with the intent to achieve effective implementation of the EOIR standard across the implementing countries. This includes the elimination of strict bank secrecy for exchange of information purposes, and improved corporate transparency (through the elimination of instruments such as bearer shares). Countries need to understand the standards they are committing to and make sure they have the resources required to exchange information. Adhering to some of these international standards may require countries to build new or different tax information databases, reorganise the tax administration or invest in new technologies to fully benefit from exchange of information.

The communiqué from a March 2017 meeting of G20 Finance Ministers and Central Bank Governors asked the OECD to prepare a list of “non-cooperative jurisdictions”, meaning those jurisdictions which fail to comply with international standards, such as the transparency standards set by the Global Forum, according to a list of criteria agreed in 2016. The list will be prepared by July 2017. According to the communiqué, “Defensive measures will be considered against listed jurisdictions.”

The OECD and G20 members agreed in July 2016 on objective criteria for identifying non-cooperative jurisdictions, with the OECD mandated to prepare, by the 2017 G20 Leaders' Summit, a list of those jurisdictions that have not yet sufficiently progressed toward a satisfactory level of implementation of the agreed international standards on tax transparency.

Jurisdictions will be assessed against three objective criteria:

  1. The implementation of the Exchange of Information on Request (EOIR) standard,
  2. The implementation of the Automatic Exchange of Information (AEOI) standard, and
  3. Joining the multilateral Convention on Mutual Administrative Assistance in Tax Matters.

Benchmarks for a first assessment against the above criteria would be:

  1. A “Largely Compliant” rating with respect to the EOIR standard;
  2. A commitment to implement the AEOI standard, with first exchanges in 2018 (with respect to the year 2017) at the latest; and
  3. Participation in the multilateral Convention or a sufficiently broad exchange network permitting both EOIR and AEOI. Those benchmarks would be adjusted over time according to an agreed plan as implementation of the standards progresses.

In order for a jurisdiction to be considered cooperative with respect to international tax transparency, it would, for the first assessment, need to meet the benchmarks of at least two of the three above-mentioned criteria. However, where a jurisdiction is determined by the Global Forum peer review process to be “non-compliant”, or is blocked from moving past Phase 1, or where it was previously blocked from moving past Phase 1 and has not yet received an overall rating under the Phase 2 process, it will be considered a non-cooperative jurisdiction notwithstanding that it may have met the benchmarks of two of the three criteria.

All Global Forum member jurisdictions except developing countries without financial centres will be assessed on their compliance with the transparency standards, as well as non-member jurisdictions that are identified by the Global Forum as relevant for purposes of its work.

The Global Forum has developed a special procedure that will enable it to evaluate, on a provisional basis in June 2017, whether a jurisdiction which has received a “Partially Compliant” or “Non-Compliant” rating has made sufficient progress in implementing the existing EOIR standard to be eligible for an upgrade in its ratings. Jurisdictions that are able to demonstrate sufficient progress will have their existing rating suspended, thus avoid being identified as non-cooperative, and then be scheduled for a full review under the second round of EOIR peer reviews.

In total, 21 jurisdictions are eligible for the fast-track process. Applications for the fast track process were due by April 2017.  Eligible jurisdictions may report their progress since the last review through a request to the Secretariat, accompanied with all supporting documentation. On this basis and also taking into account the peer input received, the Secretariat will prepare a short report highlighting the main findings and progress and determine whether the rating of the element(s) and the overall rating are likely to be upgraded. The fast-track reports will be adopted by the Global Forum in June 2017, in time to report on the progress for the G20 Leader’s Summit in July 2017.

Multilateral Competent Authority Agreement for the Common Reporting Standard (CRS)

Besides relying on the CRS Agreement for automatic exchange of financial account information, non-signatory jurisdictions may alternatively rely on bilateral agreements (such as a double tax treaty or a tax information exchange agreement), or on regional agreements (such as the EU Directive on implementation of CRS).

The CRS Agreement specifies the details of what information will be exchanged and when, deals with transmission and encryption methods and confirms that jurisdictions have appropriate confidentiality and data safeguards in place. Bilateral exchanges only come into effect between those signatories that both file notifications selecting the other jurisdiction under Section 7 of the CRS Agreement.

As of May 2017, with respect to the jurisdictions exchanging as of 2017, over 1800 relationships out of the 2,450 possible bilateral exchange relationships have been  established. First exchanges are scheduled to take place in September 2017.