The Cayman Islands and more than 40 other early adopters of a new single global standard for the automatic exchange of information between tax authorities have committed to a detailed timetable for its implementation.
The standard obliges countries and jurisdictions to exchange information obtained from their banks and financial institutions automatically on an annual basis.
In a joint statement, the group of early adopters said that following the agreement on the Common Reporting Standard developed by the Organization for Economic Cooperation and Development, they intend to implement it according “to an ambitious but realistic timetable.”
The timetable differentiates between pre-existing accounts that are open on Dec. 31, 2015, and new accounts opened from Jan. 1, 2016, which will be subject to new account opening procedures.
There are also different due diligence deadlines for the identification of high-value pre-existing individual accounts, which need to be completed by Dec. 31, 2016, and low-value pre-existing individual accounts and entity accounts, for which due diligence will need to be completed by Dec. 31, 2017.
The first information in relation to new accounts and pre-existing individual high-value accounts will be exchanged by the end of September 2017. All other account information will be exchanged from the end of September 2018 at the latest.
The group of countries, British overseas territories and Crown dependencies committed to early adoption of the common reporting standard by joining the initiative launched by the G5 – France, Germany, Italy, Spain and the U.K. – in April 2013.
“In doing so, we recognized that only those financial centers which adopt the highest standards in tax transparency and work in close cooperation to tackle cross-border tax evasion will prosper in the future,” the joint statement said.
The group invited other countries and jurisdictions to join the early adoption initiative “to create rapidly a truly global system of automatic information exchange which leaves no hiding places for tax evasion.”
OECD Secretary-General Angel Gurría welcomed the move.
“The commitment by so many countries and jurisdictions to implement the OECD’s global standard on the basis of a specific and ambitious timetable is good news for everyone who wants to see a fair and transparent international tax system. The rapidity with which the new norms are being developed and agreed shows that the political momentum for reform is now overwhelming,” Mr. Gurria said.
“Adopting the new global standard is not just a question of establishing co-operation between states, it is also about restoring the trust of citizens in government.”
EU Savings Directive
Meanwhile, Austria and Luxembourg dropped their objections to revision of the EU Savings Directive after years of opposition. It paved the way for the adoption of the directive on Monday.
The first EU Savings Directive in force since 2005 ensures that EU member states collect data on the savings of nonresidents and automatically provide this data to the tax authorities where those individuals reside. Cayman implemented the directive as a British overseas territory.
The revised directive aims to close tax loopholes and include the exchange of information of other forms of income, such as investment funds, pensions, innovative financial instruments, and payments made through trusts and foundations.
“Banking secrecy is set to die,” said European Council president Herman Van Rompuy.
Austrian Chancellor Werner Faymann said the shift would help fight tax evasion, but banking secrecy would remain intact for Austrians.
Adoption of the directive opens up negotiations with Switzerland, Liechtenstein, Monaco, Andorra and San Marino to become parties to the directive, after Switzerland said it would not adopt the directive unless all EU members, including Luxembourg and Austria, committed to it.
The European Council last week called on the five European states to also join the group of “early adopter” countries of the common reporting standard.
G20 governments have mandated the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes to monitor and review implementation of the standard.
The OECD is expected to deliver a detailed commentary on the new standard, as well as technical solutions to implement the actual information exchanges, during a meeting of G20 finance ministers in September 2014.