The Organisation for Economic Co-operation and Development (OECD) has laid out the principles for creating a fairer and more transparent global tax system in a report for this week's G8 summit.
The report, A Step Change in Tax Transparency, sets out four steps towards a standardised model for the automatic exchange of information worldwide and is intended to provide support for the G8's planned discussion on tax avoidance.
These are: enacting broad framework legislation to facilitate the expansion of a country's network of partner jurisdictions; selecting the legal basis for the exchange of information; adapting the scope of reporting and due diligence requirements and coordinating guidance; and developing common or compatible IT standards.
The report also provides potential timeframes for each step and notes that much of this work is already underway at the OECD. It also stresses that more and more jurisdictions are joining the Convention on Mutual Administrative Assistance in Tax Matters, which provides a legal basis for automatic exchange of information.
OECD Secretary-General Angel Gurria said: 'Tax systems must be fair and be seen to be fair. The OECD is helping countries work together to put an end to offshore tax evasion by delivering a secure and cost effective system of a single global standard for automatic exchange of information.'
Gurria said a growing number of European and non-European countries have agreed to join a pilot for the implementation of the standard. He also called on the G8 group to put its weight behind the OECD's work on addressing base erosion and profit shifting multinational corporations.
Gurria said: 'We will also need to close the tax avoidance loopholes used by multinational corporations, create a level playing field and help governments - in developed and developing countries alike - to raise the revenues they need to provide their citizens with the services they deserve.'
CCH senior tax writer, Stephen Relf, said that it is now recognised that offshore tax evasion is a global problem requiring global solutions.
'Little if anything will be achieved unless countries work together. One possible solution is the automatic exchange of information between countries and we have moved a step closer to this today. The OECD's report builds on recent FATCA-related and other developments and sets out how automatic exchange can be implemented in a multinational context. It seems to be a matter of when - and not if - the automatic exchange of information becomes the accepted international standard,' said Relf.
