Automatic exchange of information

In 2019, 97 countries carried out automatic exchange of information, sharing data with tax authorities on 84m accounts covering some 10 trillion euros of total assets – a significant increase over 2018, when information exchange began, and where information on 47m accounts was exchanged. The OECD reports this as evidence of ‘tremendous progress’ made by the international community in the fight against offshore tax evasion.

Under the OECD common reporting standard, countries exchange financial account information from non-residents obtained from their financial institutions automatically on an annual basis, reducing the possibility for offshore tax evasion.

Commenting on the report, Gary Ashford, partner at Harbottle & Lewis, noted that, since the OECD’s 1998 Harmful Tax Practices report (which formed the basis of BEPS Action 5), ‘the world has changed dramatically with the FATCA, CRS and currently the impending introduction of DAC6, and the requirement of intermediaries to report on cross-border arrangements, which although the reporting has now been postponed, will still come into force in January 2021’.

Tax authorities have implemented many of the OECD’s suggested measures over the years, including disclosure opportunities in return for reduced tax liabilities. Ashford points out that ‘most of those facilities are closed, particularly in the UK, and the UK is now charging penalties of up to 200%, going back 20 years in some cases. HMRC is starting to consider criminal investigations, and we will also see asset freezing orders and unexplained wealth orders starting to be used.’