OECD to report on countries’ non-compliance in tax transparency
At the recent G20 meeting in China, finance ministers stressed their support for greater tax transparency, calling for a report from the OECD on the implementation of automatic exchange of information before the end of the year, and stating that by July 2017 it wants a list of non-compliant jurisdictions
In the final communique, the finance ministers said they endorse the proposals made by the OECD working with G20 members on the objective criteria to identify non-cooperative jurisdictions with respect to tax transparency.
It states: ‘We ask the OECD to report back to us by June 2017 on the progress made by jurisdictions on tax transparency, and on how the Global Forum will manage the country review process in response to supplementary review requests of countries, with a view for the OECD to prepare a list by the July 2017 G20 Leaders’ Summit of those jurisdictions that have not yet sufficiently progressed toward a satisfactory level of implementation of the agreed international standards on tax transparency.’
The communique suggests ‘defensive measures’ will be considered against jurisdictions which appear on this blacklist.
To be judged compliant with international tax transparency requirements, the OECD says jurisdictions would be assessed against three objective criteria and would need to meet two of them. They are: implementation of the Exchange of Information on Request (EOIR) standard, the implementation of the Automatic Exchange of Information (AEOI) standard and joining the multilateral convention on mutual administrative assistance in tax matters.
The OECD reported that all countries and jurisdictions which had been asked to commit to AEOI have done so, with Bahrain, Lebanon, Nauru, Panama, and Vanuatu being the latest to make that commitment. In addition, Lebanon as well as Egypt and Paraguay have decided to join the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum), bringing its membership to 135.
The Dominican Republic, Jamaica, Nauru and Uruguay signed the multilateral convention in June, bringing to 98 the number of participating countries and jurisdictions, with Panama now also requesting to sign.
The OECD reported that over 50 countries have taken concrete steps to implement country-by-country reporting. There are now 85 members in the Base Erosion and Profit Shifting (BEPS) project, with a further 19 countries and jurisdictions that attended the inaugural meeting in Kyoto, and are likely to join the inclusive framework by year end, the OECD says.
In addition 96 countries are currently negotiating on the multilateral instrument (MLI) covering implementation of its BEPS actions, which include a number of tax treaty-related actions.
The OECD report states: ‘Major progress has been made and we expect the text of the MLI to be initialled, at the latest, in November in both official languages (French and English). This would allow the opening of the instrument for signature before year end, as per your mandate.’
The MLI will allow countries to meet the BEPS minimum standard aiming to put an end to treaty shopping (Action 6). It will also provide the possibility for countries to address the issue of hybrid mismatches, the updated definition of the ‘permanent establishment’ concept, other forms of treaty abuses with specific treaty rules, as well as improving dispute resolution processes.
More than 2,000 bilateral tax treaties could be amended if these countries sign the convention once the instrument is finalised. A signing ceremony for countries, including all G20 members, will be organised in the first half of 2017.