The Organisation for Economic Co-operation and Development has (OECD) unveiled new plans to tackle tax evasion by improving the way tax authorities share information about individuals and entities like trusts.
Countries are increasingly moving to a standard of sharing information on taxpayers even in the absence of any specific request.
This is more likely to flag up inappropriate behaviour than the longer established practice of one tax authority starting an investigation into suspicions of wrongdoing, and then making a request for data.
The European Union has estimated hundreds of billions of euros are lost each year to tax evasion. The stashing of undeclared earnings in accounts in offshore jurisdictions has long been a favoured method for hiding cash from one’s home tax authority, aided by the veil of secrecy.
The OECD, which advises its mainly rich nation members on economic and tax policy, issued an updated standard for the automatic exchange of information at the sidelines of a meeting of G20 finance ministers yesterday.
The OECD has proposed a detailed description of the kinds of information that would be exchanged and proposals for common legal and technological standards to facilitate the flow of information.
The OECD hopes to have a new draft agreement ready for countries to sign in late 2013.
The shift to an international standard on automatic sharing of information has been accelerated by the US Foreign Account Tax Compliance Act (FATCA) which forces banks outside the US to give Washington details of foreign accounts held by US citizens.
Countries like Bermuda, often labelled a tax haven by Western lawmakers, said that once they agreed to share information with the US, other large countries pressured them for a similar deal.
Meanwhile, a senior G20 official said advanced G20 economies will consider numerical targets for public debt reduction after 2016 to boost investor confidence.
The commitment, to be discussed at a summit of leaders of the world’s 20 biggest developing and developed economies (G20) in St Petersburg, Russia, in early September, will build on a G20 pledge made in 2010 to stabilise debt-to-GDP ratios by 2016, the official said.
Showing just how far apart different Group of 20 powers are on the issue of binding debt targets, another senior G20 source told Reuters that nothing had been committed to.
“There was no agreement on post-2016 targets,” the source said. “The numbers put forward simply reflect budgetary plans.”
The official said there were no numbers for Japan or for the bulk of emerging market economies and the targets were part of national plans of G20 members to put their public debt on a sustainable path.
The G20 source said the figures merely reflected the best guess as to future budget positions for most countries.
A meeting of G20 finance ministers and central bankers in Moscow on Friday and Saturday declined to set any debt targets, given a consensus that the shorter-term focus had to rest squarely on reviving growth.
Its final communiqué said progress was being made on credible medium-term fiscal strategies for the St Petersburg Summit but they should be flexible enough to support economic growth and job creation while putting debt as a share of GDP on a sustainable path.
International Monetary Fund chief Christine Lagarde told reporters after the meeting that it was up to each country to come up with the best policy mix to deliver debt reduction.
“I think the pace at which it declines ... that’s this very subtle policy mix which is subject of debate between countries,” she said.
“Our view is that it should be country specific, it should be progressive over time, but certainly for all of them, it should be anchored with medium-term measures, goals, that will really bring that degree of confidence that countries a serious about bringing their debt down in the long-run,” she said.