There are many multilateral developments regarding international tax enforcement, especially regarding the OECD, the Financial Stability Board (FSB), and the Financial Action Task Force on anti-moneylaundering (FATF).
OECD Tax Transparency
The work of the OECD’s Global Forum on Transparency and Exchange of Tax Information has been continuing. Since 2008, tax transparency has been a key feature of the G-20 summits. In the run-up to the G-20 summit held in April 2009 in London, all the key players endorsed the standards on transparency and exchange of information. In 2000 the OECD established the original Global Forum to implement the harmful tax practices initiative.
Global Forum on Taxation
As of March 16, 2011, the Global Forum includes 97 members. The forum agreed on a three-year mandate to promote the rapid implementation of the standards through the peer review of all its members and other jurisdictions that may require special attention.
The Global Forum’s mandate contains:
- An initial three-year mandate to create a strengthened Global Forum to promote rapid and consistent implementation of the standards through a robust and comprehensive peer review process.
- Two-phase review of each jurisdiction’s legal and regulatory framework (Phase 1) and practical implementation (Phase 2) of the standards on transparency and the exchange of information for tax purposes.
- In-depth ongoing monitoring of legal instruments that allow for exchange of information. A Peer Review Group, composed of 30 forum members, oversees the process. The restructured Global Forum is a consensus-based program under Part II of the OECD budget for which the OECD has a €2.9 million budget.
The aim of the Global Forum is to ensure that all jurisdictions fully implement the international standards on transparency and exchange of information.
The reports adopted so far by the Global Forum have identified some deficiencies regarding the standards’ implementation and have recommended improvement.
The Global Forum is currently developing a process whereby jurisdictions will be able to request a supplemental report reflecting the changes it has made in its legal and regulatory framework subsequent to peer review.
The Peer Reviews
In April 2011 the OECD published evaluation reports on Aruba, the Bahamas, Belgium, Canada, Estonia, Germany, and Ghana.
The peer review evaluations fall into two types. Aruba, the Bahamas, Belgium, Estonia, and Ghana were undergoing Phase 1 tests, which merely checked their legal and regulatory preparedness for tax information exchange, not whether it is actually happening.
The examinations of Canada and Germany combined a Phase 1 check with an assessment of their implementation of tax information exchange agreements in practice — a Phase 2 test.
The OECD’s summary of the results avoids the language of pass and fail, but, briefly:
- The Bahamas was found adequate on all Phase 1 counts. However, it must increase the availability of accounting information for international companies, registered private and foreign-incorporated companies, authorized purpose trusts, and foundations.
- Aruba must improve the availability of information on limited partnerships and some companies and also must move quickly to bring into force the TIEAs it has signed over the past two years.
- Belgium has signed 41 TIEAs in the past two years, but only one has been brought into force. The country needs to ratify a ‘‘significant number’’ of these agreements before it can move to Phase 2.
- Estonia’s strict bank secrecy means it is not ready to sign TIEAs. It also must improve the availability of information on foreign companies and foundations.
- Ghana lacks a legal framework required for tax information exchange, though it has only recently relaxed its banking secrecy laws. It must strengthen the availability of information on foreign companies, trusts, and underlying documentation for accounting records.
- Canada and Germany, both members of the G-7, were fully approved by their peer reviewers for both Phase 1 and Phase 2. However, they were advised to improve the availability of ownership information of bearer shares and nominees. Germany was cited as slow to respond to requests for assistance.
- As of November 5, 2011, the OECD Global Forum has so far completed and published reports on 59 of its members. Ten were published in January. Four jurisdictions — Barbados, San Marino, the Seychelles, and Trinidad and Tobago — failed their Phase 1 reviews.1
On July 6, 2011, Panama moved to the OECD’s list of jurisdictions considered to have substantially implemented the standard for exchange of information when it signed a TIEA with France. Following the Global Forum Phase 1 Peer Review, Panama has significantly amended its legislation to address some of the deficiencies identified by the Global Forum that resulted in Panama not moving forward to a Phase 2 review. At the request of Panama, the Global Forum will soon undertake a further review of whether Panama’s domestic laws, including recent changes, will allow for effective exchange of information in practice.2