Global Policy Forum

Automatic information exchange – but properly done


If a person or entity resident in one jurisdiction owns income-generating assets in another jurisdiction, the resident's tax authorities generally need to know about that asset or income, to assess their tax liabities. Nevertheless jurisdictions so far lack the ability to exchange information with each other on a regular basis. After the G20 Summit this year, automatic tax information sharing will soon become an international standard. But Switzerland insists on the most restrictive possible conditions when it comes to implementation – to the clear disadvantage of developing countries.

19 November 2013 | Alliance Sud

Automatic information exchange

by Mark Herkenrath

At the St. Petersburg G20 Summit, the leading industrialized and emerging countries again came out clearly for automatic tax information exchange. They want to see it implemented by the end of 2015 at the latest. The OECD was tasked with working out a framework agreement by next February and quickly completing work on the requisite technical infrastructure.

Moreover, the G20 Heads of State promised in their final declaration also to allow developing countries access to automatic information exchange. They pledged to support low-income countries where necessary in building up the appropriate capacities. Thus, the argument that in terms of human resources and technology poorer countries could be overwhelmed by the task of evaluating foreign bank data may soon be invalidated.

Until automatic information sharing can become a reality, however, several questions of principle must yet be clarified. Already actively involved in the negotiations under way in the OECD, Switzerland is applying the brakes and yet again defending a markedly conservative position in the interest of its financial centre. For the purposes of introducing automatic information exchange it is insisting not only on the strictest possible data protection conditionalities, but also on the principle of reciprocity.

Developing countries could be left out

Should the Swiss demand for strict reciprocity prevail, the poorest developing countries would in fact be excluded from automatic information sharing. They would only have access to foreign bank records if they in turn were able to deliver such data. In many cases, however, the elaborate administrative apparatus they would have to put in place for the purpose would be simply too expensive. The costs could quickly outweigh the benefits of the automatic information exchange.

This begs the question as to whether the principle of reciprocity makes any sense at all in dealings with developing countries. Unlike Switzerland, most of these countries hardly harbour any undeclared offshore accounts. Why, then, should they be obliged to send their bank data abroad? It would make more sense for actual tax havens to offer to transfer information unilaterally to developing countries.

As pertains to the request for strict data protection, tax secrecy does prevail in most countries. Consequently, there is little reason to assume that foreign bank data would not be treated confidentially. Besides, as early as last year the OECD drew up a report on the main protective measures. It is now assisting those developing countries that are still behind in this regard in introducing such measures. Switzerland should get involved in these endeavours as a matter of urgency.

Read the article on the website of Alliance Sud.


FAIR USE NOTICE: This page contains copyrighted material the use of which has not been specifically authorized by the copyright owner. Global Policy Forum distributes this material without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. We believe this constitutes a fair use of any such copyrighted material as provided for in 17 U.S.C § 107. If you wish to use copyrighted material from this site for purposes of your own that go beyond fair use, you must obtain permission from the copyright owner.