Common reporting standard raises tax collection rates

International efforts to increase automatic exchange of information on financial accounts has resulted in deposits held by companies or individuals in international financial centres falling by a third in the past decade, analysis by the OECD shows 

OECD figures show more than 90 jurisdictions participating in a global transparency initiative under the OECD’s common reporting standard (CRS) since 2018 have now exchanged information on 47m offshore accounts, with a total value of around €4.9 trillion (£4.3 trillion).

Voluntary disclosure of offshore accounts, financial assets and income in the run-up to full implementation of the automatic exchange of information initiative resulted in more than €95bn in additional revenue (tax, interest and penalties) for OECD and G20 countries over the 2009-2019 period. This cumulative amount is up by €2bn since the last reporting by OECD in November 2018.

Preliminary OECD analysis suggests automatic exchange of information is having a substantial impact on bank deposits in international financial centres (IFCs). Deposits held by companies or individuals in more than 40 key IFCs increased substantially over the 2000 to 2008 period, reaching a peak of $1.6 trillion (£1.2 trillion) by mid-2008.

These deposits have fallen by 34% over the past 10 years, representing a decline of $551bn (£500bn), as countries adhered to tighter transparency standards. The OECD says the onset of the automatic exchange of information initiative accounts for about two thirds of the decrease. Specifically, it has led to a decline of 20% to 25% in the bank deposits in IFCs, according to preliminary data. The complete study is expected to be published later this year.

Angel Gurria, OECD secretary-general, said: ‘The transparency initiatives we have designed and implemented through the G20 have uncovered a deep pool of offshore funds that can now be effectively taxed by authorities worldwide. Continuing analysis of cross-border financial activity is already demonstrating the extent that international standards on automatic exchange of information have strengthened tax compliance, and we expect to see even stronger results moving forward.

‘Even more tax revenue is expected as countries continue to process the information received through data-matching and other investigation tools. We really are moving closer to a world where there is nowhere left to hide.’

Pat Sweet

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