In fairness to the OECD, the paper it submitted focused on base erosion and profit shifting, where international tax rules allowed multinational enterprises to reduce taxes paid by shifting profits to low-tax jurisdictions, and this was something David Cameron had raised at an earlier G-8 summit as a result of the Amazon and Starbucks cases in the UK.
After much political chest beating, the G-20 leaders committed to a new global standard based on automatic tax information exchange, and called on the OECD to draw up the standard by February 2014.
The Standard for Automatic Exchange of Financial Account Information in Tax matters or the Common Reporting Standard (CRS) was born.
Setting the standard
The CRS is FATCA on steroids and will start in 2017 in most cases.
Although the CRS has underlying principles that derive from FATCA, it is much wider in its application.
The CRS requires jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.
The standard agreement sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by the institutions.
The CRS covers custodial and depository institutions, investment entities and specified insurance companies, unless they present a low risk of being used for evading tax and are excluded from reporting.
The financial information to be reported includes interest, dividends, account balance, income from certain insurance products, sales proceeds from financial assets and other income generated from assets held in the account or payments made with respect to the account.
Reportable accounts are those held by tax residents in relevant CRS reportable countries.
