Taking a significant step towards combating the black money menace, the Paris-based Organisation for Economic Co-operation and Development (OECD) unveiled ‘single global standard’ for automatic exchange of financial account information between jurisdictions.
To enable automatic exchange of financial account information pertaining to tax issues, the new standard makes it mandatory for the financial institutions, including banks, brokers and fund houses to collect necessary details from their clients and submit the same to their respective regulators on an annual basis.
The new Standard provides for annual automatic exchange between governments in the field of financial account information. The financial account information includes balances, interest, dividends, and sales proceeds from financial assets which are reported to governments by financial institutions. It also includes accounts held by individuals and entities, including trusts and foundations.
The new framework also provides confidentiality clause and safeguards in the exchange of information. For this the countries will need to approve domestic laws according to their respective legal jurisdictions to facilitate such cooperation.
As per this framework, each competent authority needs to notify the other competent authority immediately regarding any violation of confidentiality or failure of safeguards and any sanctions and remedial actions consequently imposed.
The framework will be formally presented by the OECD the G20 Finance Ministers at their meeting in Cairns, Australia, in September 2014.
More than 65 nations and jurisdictions have already publicly committed to implementation of the new framework, while more than 40 have committed to a specific and ambitious timetable leading to the first automatic information exchanges in 2017. Those having already committed to follow this global protocol include the US, the UK, Germany, European Union, Japan, Singapore, China, Luxembourg, British Virgin Islands, Cayman Islands, Gibraltar, Cyprus, Bermuda, Isle of Man, Greece and Liechtenstein.
Importance in India’s context
The development assumes significance in case of India, as it has been facing difficulties in fetching information on cases of suspected tax evasion from other countries, especially Switzerland, which has been maintaining that such details cannot be provided without specific proof of financial irregularities by the concerned Indian client of Swiss banks.
An initial framework was released by OECD in this regard earlier this year and India became one of the first adopters of this global convention. Later, Switzerland also agreed to conform to this Standard, while a few more nations have now expressed their willingness to adopt the same and these include Mauritius — another country with which India has been working on a revised bilateral treaty due to concerns of money laundering.