This article aims to analyze the role of transparency and exchange of information in helping governments fight tax evasion and other illicit financial flows, in order to generate much needed revenues in the Covid-19 crisis and beyond.
One of the most important areas that currently reflects the international cooperation between tax administrations is exchange of information.
We will focus on Tax Transparency in Asia 2023: Asia Initiative Progress Reportacknowledges progress achieved in Asia between 2009 and 2022 in implementing transparency and exchange of information (EOI) for tax purposes.
1. GLOBAL FORUM ON TRANSPARENCY AND EXCHANGE OF INFORMATION FOR TAX PURPOSES: REGIONAL INITIATIVES.
With 166 members, the Global Forum on Transparency and Exchange of Information for Tax Purposes is the leading international body working on the implementation of global transparency and exchange of information standards around the world.
Regional capacity-building programmes are provided by the Global Forum Secretariat in collaboration with regional organisations. They are essential partners in building trust, long term relationships and capacity for transparency and exchange of information for tax purposes. Programmes are currently being run, or in preparation, for the following regions: Africa, Asia, Latin America, Pacific, Middle East and The Caribbean.
The first regional initiative launched by the Global Forum is the Africa Initiative, which is also therefore its most advanced. This has included significant engagement at ministerial level to ensure political buy-in and sustained momentum. This is reflected in the Yaoundé Declaration, which provides support to the fight against illicit financial flows from Africa.
The ministerial engagement in the Latin America initiative is demonstrated by the Punta del Este Declaration, in relation to maximising the effective use of the information exchanged under the international tax transparency standards to tackle tax evasion, corruption and other financial crimes.
Together with the Asian Development Bank and other partners, the Global Forum launched in 2020 a Pacific Initiativeto raise awareness and enhance tax transparency for the benefit of developing Pacific Islands.
A new Asia Initiative, supported by Indonesia's Finance Minister and Asian Development Bank's President, was launched during the Global Forum plenary meeting on 17 November 2021.
2. ASIA INITIATIVE.
On 17 November 2021, Indonesia’s Minister of Finance Sri Mulyani Indrawati and the President of the Asian Development Bank (ADB), Masatsugu Asakawa, both firmly supported the launch of an Asia Initiative on tax transparency and called jurisdictions in the region to join this important milestone to support post-pandemic recovery efforts.
In her keynote speech delivered on the opening of the 2021 Global Forum plenary meeting, Minister Indrawati insisted on regional co-operation as a key factor to advance the transparency agenda. She predicted that the Asia Initiative would help tackle tax evasion and avoidance, corruption and illicit financial flows, and ultimately enhance domestic resource mobilisation to generate much-needed revenue for the benefit of Asian countries.
Similarly, ADB’s President Asakawa declared that the Bank would stand fully behind the Initiative as an effort to strengthen international co-operation in the field of tax transparency and exchange of information. Other Asian countries and organisations have given their support to the Initiative, which will start in 2022.
The Study Group on Asia-Pacific Tax Administration and Research (SGATAR) is a partner of the Asia Initiative.
3. TAX TRANSPARENCY IN ASIA 2023
The Asia Initiative has a very ambitious plan of activities, covering the implementation of the international tax transparency standards and the use of all forms of administrative co-operation to fight tax evasion and other illicit financial flows. While acknowledging the various levels of EOI maturity across the region, the Asia Initiative aims to benefit all. We look forward to welcoming more Asian members for mutual contributions and benefits to the work of the Initiative,” said the Co-Chairs of the Asia Initiative, Sanjay Malhotra, India, and Suryo Utomo, Indonesia.
All 22 Asian members of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) are implementing the transparency and exchange of information on request (EOIR) standard and 16 of them are committed to starting automatic exchange of financial account information (AEOI) exchanges by 2024. Overall, Asian members have reported at least EUR 20.1 billion additional revenues linked to EOI since 2009. With more Asian members starting to use EOIR to support domestic investigations and to implement AEOI, additional revenues are expected to be generated in the coming years.
Despite wide adherence to the international standards, their effective use remains uneven in Asia. Many Asian countries are not yet members of the Global Forum and some jurisdictions still make few EOI requests or have not yet committed to implement the AEOI standard by a specific date.
Through the Asia Initiative, launched at the end of 2021 under the Indonesian G20 Presidency, 16 Asian countries had signed up to the Bali Declaration by the end of 2022. Their commitment to achieve full EOI potential for the region has set an example for other countries in the region to follow.
The report highlights how Asian member countries benefit from the Global Forum’s capacity-building programme to further implement EOI and mobilise domestic revenues. Thanks to the support of its technical and donor partners, the Asia Initiative will enhance the technical assistance needed in Asia and effectively promote tax transparency across the region.
4. FINAL THOUGHTS
Tax evasion and other illicit financial flows are a global challenge that requires a global response.
International tax cooperation must be part and parcel of a set of effective and well-coordinated multilateral actions to respond to the crisis.
It is more urgent than ever to work together to fight tax evasion and tax avoidance, including illicit financial flows. International tax cooperation should be scaled up in a way that is universal in approach and scope and fully takes into account the different needs and capacities of all countries.
Tax Cooperation es important for improving domestic tax transparency, coordinated global response, building peer networks with other jurisdictions, deterrence to tax evaders, securing domestic revenue base, assisting development of economy and Reinforcement of the social cohesion.
It is now more than ever vital that tax administrations obtain information about the relevant actors and their economic activities, that they develop the regulatory capacity to determine their obligations and the management capacity to implement legislation efficiently.
The important thing is that initiatives similar to the one in Asia in other regions are already giving excellent results.
In short, The Asia initiative is a great opportunity for the countries of the region to obtain such important resources for their development.
This first Tax Transparency in Asia report is therefore crucial, as it takes stock of the state of EOI in Asia and details Asian members’ progress in implementing the tax transparency and EOI standards and the resulting benefits for the years 2009-2022.
Its key findings will help inform Asia Initiative members on issues they wish to concentrate future efforts on.
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