The 44-page Common Reporting Standard (CRS), as the OECD refers to the document, was developed by the organisation in association with the G20 countries and in "close cooperation with the EU”, the OECD said.
“Under the standard, jurisdictions obtain financial information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis,” the OECD explains in an introduction to the document.
‘brokers, insurers, collectives’
Banks and custodians are not the only types of financial institutions that the OECD says it expects to see reporting under the CRS, but also such types of financial institutions as brokers, “certain” collective investment vehicles and “certain” insurance companies.
The OECD standard consists of two components: the Common Reporting and Due Diligence Standard, which contains the reporting and due diligence rules, and the Model Competent Authority Agreement, which contains the detailed rules on the exchange of information.
It is described as drawing “extensively” on earlier work of the OECD in the area of automatic information exchange, as well as on progress made within the EU and with global anti-money laundering standards.
The recent inter-governmental implementation of the US Foreign Account Tax Compliance Act (FATCA), the OECD noted, has “acted as a catalyst for the move toward automatic exchange of information in a multilateral context”.
As reported, a system of so-called inter-governmental agreements has been designed to enable financial institutions around the world to comply with FATCA, a new US law aimed at cracking down on the use of foreign financial institutions by American citizens, by having them provide the data sought by the US authorities to the government of the country in which they are operating.
'Draws ono FATCA Model 1 IGA'
Nick Matthews, of Kinetic Partners, the international regulatory consultants, said that at first glance the new OECD standard appears to “draw heavily on the Model 1 FATCA IGA…as expected".
“The OECD’s promotion of a global standard for AEOI [automatic exchange of information] will not be a surprise to many financial services firms,” he added.
“Given that the move towards global tax transparency seems inexorable, this is a positive step to developing a common international standard, and a less painful regime for the firms which will bear the burden of further tax transparency rules than if each country were left to do its own thing."
That said, it's not, in its current state, perfect, Matthews added.
Particularly with respect to how multilateral agreements will be achieved, and inconsistencies minimised, he noted, much further work needs to be done in all the jurisdictions, making the current time-frame for implementation of the AEOI regime – understood to be mid-2015 – appear “ambitious”.
G20 Summit in London
The origins of the Common Reporting Standard unveiled by the OECD today will be seen by some to date back to April, 2009, when a summit of G20 leaders took place in London at a time when the global financial crisis was still unfolding. Many politicians keen to find scapegoats for the situation blamed tax havens and tax secrecy, and against this backdrop, the foundation for a new world order of greater transparency and eagerness to exchange information was laid. Earlier work by the OECD, dating back to the late 1990s, included the establishment of the definition for the term "tax haven".
Before 2009, only 45 tax information exchange agreements had been signed by countries around the world, even though the template for such agreements dated back to 2002. The number leapt substantially in 2009, when the OECD announced that 12 TIEAs with what it regarded as "significant countries" would be considered the minimum necessary for a jurisdiction to be considered eligible for its so-called "white list". At last count more than 500 had been signed.
To read and download the new OECD reporting standard, click here.
To read and download a copy of an 11-page OECD background briefing on the Automatic Exchange of Financial Account Information, click here.
