The OECD welcomed a new model international tax agreement that allows the implementation of the of the Foreign Account Tax Compliance Act through automatic exchange between governments. The agreement developed by the United States, France, Germany, Italy, Spain and the United Kingdom aims at reducing compliance costs for financial institutions and provides for reciprocity.
The model agreement calls on the OECD to work with interested countries on adapting the terms of the agreement to create a common model for automatic exchange of information, including the development of reporting and due diligence standards for financial institutions.
OECD Secretary-General Angel Gurría said he welcomes the cooperative and multilateral approach on which the model agreement is based.
“We at the OECD have always stressed the need to combat offshore tax evasion while keeping compliance costs as low as possible. A proliferation of different systems is in nobody’s interest,” he said. “We are happy to redouble our efforts in this area, working closely with interested countries and stakeholders to design global solutions to global problems to the benefit of governments and business around the world.”
As a next step, the OECD will organise, in cooperation with the Business and Industry Advisory Committee to the OECD, a briefing session on the “Model Intergovernmental Agreement on Improving Tax Compliance and Implementing FATCA” at OECD headquarters in Paris in September 2012. The Organisation will then advance to design common systems to reduce costs and increase benefits for governments and businesses alike.
The OECD also released two new reports on automatic exchange and confidentiality. The report “Automatic exchange of information” outlines what it is, how it works, its legal basis and the OECD’s efforts in this area. The report was initially presented at the Los Cabos G20 Summit in June as a “tool to counter offshore non-compliance”. The OECD maintained that while it is committed to facilitating automatic information sharing for those countries that want to adopt it, its efforts do “not suggest a change in the current international standard, which is information exchange upon request”.
A second report “Keeping it safe” describes legal framework and best practices to protect the confidentiality of information exchanged for tax purposes. It provides practical guidance, including recommendations and a checklist, on how to meet an adequate level of protection and safeguards when tax and financial information is transmitted between two countries.