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Countries to Exchange Account Information in September


By added on 30/08/2017

More than 50 jurisdictions—excluding the U.S.—are scheduled to exchange data on foreign accounts starting in September via the OECD’s recently launched common transmission system (CTS), reports Bloomberg BNA.

The CTS, launched Aug. 24 in Paris, will allow the jurisdictions to securely exchange information under the common reporting standard (CRS).

Under the CRS, a total of 102 jurisdictions have agreed to automatically provide one another with annual reports about accounts belonging to people subject to taxes in each member nation. Previously they shared information only on request, making it harder to identify suspect accounts.

Monica Bhatia, head of the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes, said the CTS is a “revolutionary change that we wouldn’t have thought about three years ago.”

But there are challenges ahead, she said during an Aug. 28 panel discussion at the International Fiscal Association Congress in Rio de Janeiro.

Confidentiality

“Confidentiality requirements are really central to this exchange,” Bhatia said. “It concerns taxpayers’ data and taxpayers’ rights.”

The OECD’s Global Forum has created a system, modeled after the U.S. Foreign Account Tax Compliance Act (FATCA), to safeguard financial information, Bhatia said.

The Global Forum has carried out confidentiality assessments by experts in the fields of cybersecurity, IT security, and law. More than two dozen of the jurisdictions failed the assessment, according to Bhatia. If jurisdictions don’t pass the confidentiality assessment, they aren’t entitled to receive information from their peers.

“They cannot be expected to receive information, but that doesn’t mean that they don’t provide the information either,” Bhatia said. Until those jurisdictions fix their problems based on the Global Forum’s recommendations “the exchange becomes nonreciprocal.”

The Global Forum will start comprehensive reviews in 2019 of the jurisdictions that will have been exchanging data for two years, and also start reviews of a second batch of jurisdictions that will start exchanging information in 2018.

Bhatia said the information will be made public after the peer reviews.

U.S. Approach

The U.S. isn’t a participant in the CRS because it enacted FATCA, which requires foreign banks to report U.S. account holders. Like the CRS, it’s meant to combat the use of offshore bank accounts to evade taxes.

Co-panelist Mark Matthews, member at Caplin & Drysdale in Washington, acknowledged that he’s “fairly critical of FATCA " and that the U.S. will not be joining the CRS “for the indefinite future.”

“Obviously the political environment in the United States is as fractured as it’s ever been,” Matthews, a former deputy commissioner of the Internal Revenue Service, said during the IFA panel. “There is utterly no shot at any legislation that will fundamentally advance exchange of automatic information,” he said, citing President Donald Trump’s “anti-globalist view.”

IRS Quality Problems

Matthews said exchange of information doesn’t seem to be on anyone’s priority list. “If you look under the hood, that’s where the trouble starts for the system.”

The IRS has significant quality problems, according to Matthews. Part of the problem is that the IRS has about 600 data systems, some of which are ancient. “In any given day, there are constant problems.”

Section 6038A and 6038C are a step in the right direction.

Matthews said he doesn’t believe the U.S. will have a workable system soon to analyze the data collected through FATCA and be able to use it the way it was envisioned by the statute.

Still, “as confident as I am that it’s not working as it should, I know it will get there,” Matthews said. “And when that tiger is created, it’ll be one brutal tiger.”