A top world economic group has called for the creation of a global system to automatically funnel financial information about individuals and companies from countries where their earnings and investments are located to jurisdictions where they might owe taxes.
The Organization for Economic Cooperation and Development (OECD), which is spearheading an effort to curb tax evasion by individuals and close some controversial tax loopholes for corporations, said that the foundation of such a system is already emerging because of reporting requirements newly imposed by the United States.
The Foreign Account Tax Compliance Actrequires overseas financial institutions to send the Internal Revenue Service information about accounts held by Americans in an effort to curb the use of foreign tax havens.
Though overseas banks have complained about the regulatory burden, major financial centers such as the United Kingdom already have reached data-sharing agreements with the United States. What’s more, the OECD said, the U.S. requirement is prompting other nations to consider sharing the information they will already have to send to the United States.
In a paper submitted to the Group of 8 top economic powers meeting in Ireland this week, the OECD said that such a system should be made automatic and go global — with data flowing freely from banks, investment houses and other financial institutions to governments around the world.
The resulting network of information, the OECD said, would curb what it characterized as a global problem as governments fight for revenue in a time of budget constraints throughout the industrialized world.
“Vast amounts of money are kept offshore and go untaxed,” the organization said in its report. “Tax evasion is a global issue requiring global solutions — otherwise the issue is simply relocated, rather than resolved.”
Major European nations in April said they would begin a data exchange, and the list of nations that have signed on is growing. Significantly, the U.K. has struck a data-sharing agreement with commonwealth territories such as the Cayman Islands that are among the world’s acknowledged tax havens.
The OECD is a group of 34 mostly developed nations that work together on a range of economic policy and development issues. It does not include major developing nations such as China, India and Brazil, but it does collect statistics on the global economy and is an important forum on issues such as cross-border taxation.
The Washington Post
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