OECD Secretary-General issues statement on “Panama Papers”
On 4 April 2016, the OECD Secretary-General Angel Gurría issued the following statement on the “Panama Papers”.
“The ‘Panama Papers’ revelations have shone the light on Panama’s culture and practice of secrecy. Panama is the last major holdout that continues to allow funds to be hidden offshore from tax and law enforcement authorities. The OECD has been leading a global crackdown on these practices since 2009, working hand-in-hand with the G20. Through the Global Forum on Transparency and Exchange of Information, we have constantly and consistently warned of the risks of countries like Panama failing to comply with the international tax transparency standards. Just a few weeks ago, we told G20 Finance Ministers that Panama was back-tracking on its commitment to automatic exchange of financial account information. The consequences of Panama’s failure to meet the international tax transparency standards are now out there in full public view. Panama must put its house in order, by immediately implementing these standards.
While the “Panama Papers” data expose nefarious activities, they also show a decline in the use of offshore companies and bearer share companies, which is a testament to the incredible transformation effected in the last 7 years to establish robust international standards on tax transparency, including on beneficial ownership: 132 jurisdictions have committed to the standard on exchange of information ‘on request’. Of those, 96 jurisdictions will introduce automatic exchange of financial account information within the next 2 years. Almost 100 jurisdictions have joined the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. As a result of our in-depth peer review process, the use of bearer share companies is close to being eliminated across the world, and the beneficial ownership rules have been strengthened to ensure that information is now available to tax authorities when they need it.
Establishing global standards and making commitments are just the start though. Effective implementation is the key to lifting the veil of secrecy once and for all and eradicating tax evasion. The time has come to make sure that no jurisdiction can benefit from failing to meet their commitments. In the run-up to September’s G20 Leaders Summit in Hangzhou, we must use every opportunity to deliver. The next G20 Finance Ministers meetings and the Global Anti-Corruption summit taking place in London in May will be critical.”
The Global Forum on Transparency and Exchange of Information for Tax Purposes monitors the standards on transparency: tax information exchange ‘on request’ (EOIR), and automatic exchange of information (AEOI). Both of these standards can be effectively implemented through the Multilateral Convention on Mutual Administrative Assistance in Tax Matters.
New Zealand is party to OECD’s Convention on Mutual Administrative Assistance in Tax Matters – see Double Tax Agreements (Mutual Administrative Assistance) Order 2013. Further information about other jurisdictions participating in the Convention on Mutual Administrative Assistance in Tax Matters as at 14 March 2016 is available at http://www.oecd.org/tax/transparency/
Consultation on AEOI implementation in New Zealand
On 19 February 2016, the issues paper, “Implementing the global standard on automatic exchange of information”, was released by Policy and Strategy, Inland Revenue, seeking public feedback on proposals for implementing the G20/OECD global standard for automatic exchange of information (AEOI).
The AEOI is aimed at countering tax evasion and is intended to be a new means for recovering lost tax revenue and improving transparency in tax matters. The issues paper specifically concerns, and seeks submissions on, decisions that need to be made regarding New Zealand’s implementation of the Common Reporting Standard, or CRS. The CRS sets out rules to be imposed on financial institutions for:
• the conduct of due diligence on their non-exempt accounts to identify “reportable accounts” (broadly, covering certain accounts held or controlled by tax residents from reportable jurisdictions) and “undocumented accounts”
• the collection of details of financial assets and income in relation to any reportable accounts that are identified, and
• reporting the information on reportable accounts and undocumented accounts to the tax administration in the jurisdiction in which the financial institution is located (that is, for New Zealand financial institutions, to Inland Revenue). This information about reportable accounts will then be exchanged with the relevant reportable jurisdiction.
New Zealand made its initial commitment to implement AEOI on 7 May 2014 and subsequently decided that the first exchanges of information with other tax authorities would be completed by 30 September 2018, in line with New Zealand’s international commitment. To meet this exchange deadline, AEOI obligations are to apply in New Zealand from 1 July 2017.
Given that the compliance costs of implementing by 1 July 2017 are likely to be high, officials have considered the possibility of transitional arrangements for financial institutions (within the confines of what is allowable under the CRS).
Marilyn Hay, Consultant Editor
Source: www.oecd.org/tax and www.taxpolicy.ird.govt.nz