Automatic Exchange of Information is Working, Says OECD
New data from the OECD indicates that Hong Kong and Singapore are adhering to tighter global standards on tax transparency.
The OECD (Organisation for Economic Cooperation and Development) says IFCs (international financial centres) such as Hong Kong and Singapore are adhering to tighter global standards on tax transparency and are seeing a fall in bank deposits as a result.
This was one highlight of new data on international efforts to improve transparency via the AEOI (automatic exchange of information) on financial accounts, which the OECD presented to the meeting of G7 finance ministers and central bank governors in Japan last weekend.
In the ten years since 2009, deposits held by companies or individuals in more than 40 key IFCs fell by 34%, or USD 551 billion. They had reached a peak of USD 1.4 trillion in mid-2008.
“A large part of that decline is due to the onset of the AEOI initiative, which accounts for about two thirds of the decrease. Specifically, AEOI has led to a decline of 20% to 25% in the bank deposits in IFCs,” the OECD said in a statement.
The latest peer review report on Hong Kong from the OECD’s Global Forum on Transparency and Exchange of Information in March rated the city as ‘Largely Compliant’ with the international standard on transparency and EOIR (exchange of information on request).
The report noted some deficiencies relating to Hong Kong’s transparency measures, however: “Some improvements are now required to ensure the availability of beneficial ownership information on all the entities and legal arrangements and to continue to ensure that the new obligation on companies to maintain a register of significant controllers is well monitored in practice.”
It added that Hong Kong also needed to ensure accounting standards were reliable and satisfactorily enforced.
An amendment to the Inland Revenue Ordinance, passed in March, will expand the number of jurisdictions with which Hong Kong exchanges tax information to 126 from 1 January 2020.
This means, under AEOI, financial institutions in Hong Kong will be required to report financial account information it has about any tax resident of any of those jurisdictions to the IRD (Inland Revenue Department), which will exchange it with the tax authorities of the jurisdiction concerned.
Singapore received an ‘Overall Compliant’ rating in October 2018. The Global Forum said Singapore had taken measures to address the recommendations in its 2013 report, including strengthening its laws and regulation to ensure compliance with the standard on the availability of beneficial ownership information.
The report to finance ministers also revealed that by the end of 2018, 90 of the 100 jurisdictions that had committed to start AEOI in 2017 or 2018 had done so. The OECD described this as “the largest tax information exchange event in history”.
It added that by June 2019, jurisdictions around the globe had identified over EUR 95 billion (USD 107.3 billion) in tax, interest and penalties from other initiatives such as voluntary compliance mechanisms and other offshore investigations, and that information on more than 47 million financial accounts were exchanged in 2018 alone, with a total value of around EUR 4.9 trillion.
