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 the new Asia initiative of Global Forum on Transparency and Exchange of Information for Tax Purposes.
With 164 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.
Since the G20 declared the end of banking secrecy in 2009, the international community has achieved great success in the fight against offshore tax evasion. Working through the Global Forum, countries have implemented robust standards that have prompted an unprecedented level of transparency in tax matters.
The main areas of expertise are the following:
1) Exchange of information on request (EOIR) This standard requires the transparency of banking and accounting records as well as ownership of entities and legal arrangements. It provides a framework for obtaining information on request between tax authorities.
2) Automatic exchange of information (AEOI) This standard allows for the automatic annual exchange of information on offshore financial accounts.
3) Capacity building and technical assistance activities: ensure that all our members receive support, and benefit from the tools to implement the international tax standards. Guidance material, e-learning courses and virtual classes are accessible through the resources tab.
The Global Forum is a key international body working on the implementation of international standards for tax transparency. It ensures that these high standards of transparency and exchange of information for tax purposes are in place around the world through its monitoring and peer review activities.
Nearly 100 countries carried out automatic EOI in 2019, enabling their tax authorities to obtain data on 84 million financial accounts held offshore by their residents, covering total assets of 10 trillion euros ($11.8 trillion).
This represents a significant increase over 2018- the first year of such information exchange- where information on 47 million financial accounts was exchanged, representing 5 trillion euros. The growth stems from an increase in the number of jurisdictions receiving information as well as a wider scope of information exchanged.
Information on more than 75 million financial accounts exchanged automatically in 2020, covering total assets of around EUR 9 trillion was exchanged automatically.
EUR 112 billion of additional revenues (tax, interest, penalties) identified so far through voluntary disclosure programmes and offshore investigations, of which over EUR 30 billion identified by developing jurisdictions
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 Initiative to 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.
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.
The Asia Initiative aims at giving a regional voice to its members and help them advance the transparency agenda, with the support of the Global Forum, in co-operation with the Asian Development Bank, the Asia Pacific Tax Hub and other development partners.
The Asia Initiative is opened to all Asian jurisdictions, with the ambition to learn and collaborate.
On 16 February 2022, 49 participants, among whom 15 Tax Commissioners and Deputy Commissioners (participants) from 18 Asian members of the Global Forum and 3 development partners, came together for the first meeting of the Asia Initiative.
The participants welcomed the organisation of the first meeting of the Asia Initiative, a side event of Indonesia’s G20 Presidency, which highlights the critical role of the implementation and use of the tax transparency standards in a sustainable post-pandemic recovery and the importance of a stronger regional and international co-operation to address tax evasion and other illicit financial flows. They also welcomed the participation of the Asian Development Bank, the Study Group on Asian-Pacific Tax Administration and Research, and the World Bank Group.
They shared their experience and explored opportunities offered by tax transparency and tax co-operation to fight tax evasion and other illicit financial flows, and ensure fair taxation which are critical to global efforts for a sustainable recovery.
The Global Forum Secretariat presented its regional initiatives in Africa and Latin America and highlighted the prominent role tailored regional capacity-building programmes have to advance the tax transparency and development agenda, and the fight against tax evasion and other illicit financial flows.
There was broad understanding amongst the participants on the critical role of the political buy-in through a ministerial declaration to set high-level objectives and the need of an appropriate governance to develop actions and activities to meet these objectives.
The participants welcomed the draft Ministerial Declaration calling for enhancing the use of tax transparency for a sustainable mobilisation of domestic resources. They discussed the content of the draft declaration, in particular the high-level objectives of the Asia Initiative.
They also discussed the proposal for the governance of the Asia Initiative. They recognised that such a governance was critical to create a regional ownership of the Initiative and facilitate achievements and monitoring of the objectives that will be set in the Ministerial Declaration.
Following the discussions, the participants approved the governance of the Asia Initiative. In particular, they agreed that: (i) the initial mandate of the Initiative will be until 2026; (ii) the work of the Asia Initiative will be steered by Co-Chairs being senior officials of Tax Administration or Ministry of Finance; and (iii) the Co-Chairs will be designated for a two-year term with an overlap of only one year.
The participants finally welcomed the progress made during the meeting and looked forward to the signing of the Ministerial Declaration, the development of the high-level work plan, and the start of the Asia Initiative’s activities.
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.
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