In the aftermath of the release of the "Paradise Papers", 200 delegates from 147 countries and jurisdictions met in Yaoundé, Cameroon recently for the 10th meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes.
The Global Forum adopted the first report on the status of implementation of the Automatic Exchange of Information (AEOI) Standard a few weeks after almost 50 countries started exchanges of information under the new standard on automatic exchange of information, with another 53 countries starting in September 2018. The principle of annual implementation reports and peer reviews were agreed at the meeting to ensure effective implementation and a level playing field.
The Global Forum published peer reviews of Curaçao, Denmark, India, Isle of Man, Italy and Jersey.
According to the Transparency International website the publications bring to a total of 16 the number of second round reviews of the Forum's 147 member countries and jurisdictions based on its international standard of transparency and exchange of financial account information on request. The standard was reinforced last year to tackle tax evasion more effectively, particularly in areas covering the concept of beneficial ownership.
Delegates at the Yaoundé meeting also agreed that the countries and jurisdictions working within the Global Forum as well as within the Inclusive Framework on Base Erosion and Profit Shifting (BEPS) could provide support to the European Union on its current listing exercise to identify third country jurisdictions that fail to comply with tax governance standards.
In other developments at the meeting, the Global Forum's Africa Initiative will continue the work in order to benefit from advances in tax transparency. Other regional initiatives in Latin America and the Caribbean and in Asia are also helping to improve cross border taxation through effective use of exchange of information, both on request and automatically.
"Cameroon was proud to host the 10th Global Forum meeting as tax evasion and avoidance represent huge loss of revenues that countries could invest in public services" said Alamine Ousmane Mey, Minister of Finance, Cameroon. "The work of the Global Forum is the key for developing countries, including those of Africa, and we are looking forward to keep working with our peers to strengthen global tax transparency".
The Global Forum is the continuation of a forum which was created in the early 2000s in the context of the OECD's work to address the risks to tax compliance posed by non-cooperative jurisdictions. The original members of the Global Forum consisted of OECD countries and jurisdictions that had agreed to implement transparency and exchange of information for tax purposes. The Global Forum was restructured in September 2009 in response to the G20 call to strengthen implementation of these standards.
The Global Forum now has 147 members on equal footing and is the premier international body for ensuring the implementation of the internationally agreed standards of transparency and exchange of information in the tax area. Through an in-depth peer review process, the restructured Global Forum monitors that its members fully implement the standard of transparency and exchange of information they have committed to implement. It also works to establish a level playing field, even among countries that have not joined the Global Forum.
In 2014, the Global Forum on Transparency and Exchange of Information for Tax Purposes (the Global Forum) adopted the Standard for Automatic Exchange of Financial Account Information in Tax Matters (the AEOI Standard) developed by the OECD working with G20 countries.
To deliver a level playing field, the Global Forum launched a commitment process under which 102 jurisdiction have committed to its implementation in time to commence exchanges in 2017 or 2018.
With exchanges under the AEOI Standard having now commenced amongst almost 50 jurisdictions, there has been a major shift in international tax transparency and the ability of jurisdictions to tackle offshore tax evasion.
This is particularly remarkable when it is considered that during the past few years each of those jurisdictions had to (i) introduce detailed domestic rules requiring their financial institutions to collect and report the data to be exchanged, (ii) conclude international agreements with each of their partners to deliver the widespread exchange networks necessary for automatic exchange, and (iii) put in place the technical solutions to link into the Common Transmission System (CTS) that was put in place by the OECD's Forum on
Tax Administration and which is being managed by the Global Forum.
The monitoring results in relation to those that commenced exchanges this year essentially show the full delivery of the commitments made, including the timely collection of the data domestically - 100% have the data collection laws in place - and its widespread exchange internationally - given that 98% of the potential exchange agreements were activated in good time.
The work to deliver on the commitments to implement the AEOI Standard is, however, not yet complete, with over 50 more jurisdictions committed to commencing exchanges next year. The monitoring results to date suggest that the delivery of the commitments will not be as comprehensive as for those that started exchanging in 2017.
While many jurisdictions are fully on track, with the domestic laws in place (amounting to 93% of jurisdictions for 2018 exchanges) and have made good progress in putting in place the international legal framework, there are a certain number of jurisdictions that have missed key milestones and face challenging timelines to deliver on the commitments made.
While it is expected that the large majority of the over 100 jurisdictions committed to commencing exchanges in 2017 or 2018 will deliver on the commitments made, an intense focus must be maintained on implementation.
This is the first detailed annual report to be published by the Global Forum on the implementation status of those committed to implementing the AEOI Standard in time to commence exchanges in 2017 or 2018. The contents reflect the situation as of 17th November 2017. The second annual report will be published in 2018. In the interim, the latest developments can be found on each jurisdiction's website and on the AEOI Portal.
Peer reviews of Exchange of Information on Request (EOIR) have been the Global Forum's main activity since 2009. These are carried out by its 30 member Peer Review Group and adopted by the plenary. The first round of reviews in which all member jurisdictions and jurisdictions relevant to the work of the Global Forum were reviewed against the 2010 Terms of Reference has been completed.
Following calls in April 2016 by the G20 Finance leaders to establish an objective criterion and a list of jurisdictions, which have not made satisfactory progress in implementing the international tax transparency standards, a special Fast-Track review procedure was approved at the 2016 Georgia plenary meeting. This procedure was implemented during April-June 2017. Several jurisdictions were able to demonstrate progress in implementing the Standard through this procedure which resulted in a provisional upgrade to their ratings.
In a new round of reviews, launched in 2016, assessments were made against the 2016 Terms of Reference which contain principles which have been revised to ensure that these reflect the latest developments in international tax transparency.
The peer review process evaluates jurisdictions' compliance with the international standard of transparency and exchange of information on request. In accordance with the peer review Methodology, reviews take place in two phases: Phase 1 examines the legal and regulatory framework; Phase 2 looks into the implementation of this framework in practice. In the first round, certain jurisdictions underwent combined reviews, which evaluated together the Phase 1 and Phase 2 aspects. In the new round, all reviews will be carried out in a combined manner. All members of the Global Forum, as well as jurisdictions identified by the Global Forum as relevant to its work, are reviewed in the order established by the Schedule of Reviews. After completion of both Phases of the review process, each jurisdiction receives an overall rating.
The international standard against which jurisdictions are assessed provides for exchange on request of foreseeably relevant information for carrying out the provisions of a tax convention or for the administration or enforcement of the domestic tax laws of a requesting party.
The Global Forum Terms of Reference break down the standard in ten essential elements, divided into three main parts: A - availability of information, B - access to information, C - exchange of information. For the exchange of information to be effective, each jurisdiction should have appropriate international EOI instruments in place with all relevant partners, but it must also make sure that the information sought is available and accessible to its competent authority. Information which is not available or cannot be accessed cannot be exchanged. However, even if a jurisdiction never exchanges information, implementing the Global Forum's standards on availability of and access to information is key to ensuring that it can protect its own domestic tax base.
The reviews are driven by peers. During the reviews, all members of the Global Forum are invited to provide inputs regarding their EOI experience with the assessed jurisdiction or to flag any specific issues they would like to see examined. The assessment teams - which usually consist of two expert assessors from Global Forum member jurisdictions along with an administrator from the Secretariat - take into consideration the inputs received.
The second round of peer reviews was launched in July 2016 under strengthened Terms of Reference. These include a strengthened standard on the availability of beneficial ownership information - as set out by the FATF standard - as well as its access by the tax authorities. Previously, the Global Forum standard only required the availability of legal ownership and identity information of legal entities and arrangements. This new requirement will strengthen the fight against anonymous shell companies and the use of legal arrangements to conceal ownership identity.
The draft peer review reports are discussed and approved by the Peer Review Group, and are finally adopted by all Global Forum members. The report is published following the adoption by the Global Forum where areas of weakness are identified during reviews, the reports include recommendations setting out clearly what improvements jurisdictions need to make. Jurisdictions are required to provide follow-up reports on an annual basis on the actions they have taken to address the recommendations.
Many jurisdictions make substantial changes to their legal and regulatory frameworks and practices before their reviews. Some others who initially do not receive satisfactory ratings are able to address recommendations and improve their ratings later, through a supplementary review procedure, which has been established so that these changes can be evaluated and given public recognition.
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