18th November 2014
International tax transparency came a step closer to realisation when 51 jurisdictions worldwide added their signatures to a Multilateral Competent Authority Agreement which will allow an automatic exchange of information relating to taxes.
The meeting of all OECD and G20 countries in Berlin endorsed this move towards transparency. With 39 ministers at the signing ceremony, the OECD labeled it as a record gathering of ministers focused on cooperating towards an end to tax evasion.
After the signing ceremony, OECD secretary-general Angel Gurria said: "The world is quickly becoming a smaller place for tax cheats, and we are determined to ensure that developing countries also reap the benefits of greater financial sector transparency”.
The agreement is the first of its kind and those who already signed have pledged to prepare to begin exchanging information by September 2017. Many herald this pact as an important step towards achieving the fulfilment of the international tax reform agenda.
Christian Kaeser, global head of tax at Siemens and chairman of the International Chamber of Commerce (ICC) commission on taxation said the joint agreement on these regulations “proves that international alignment in tax-related matters is not impossible” and will help avoid such problems caused by international inconsistency like double taxation.
While lauding the “groundbreaking agreement” as “yet another step towards global transparency in tax affairs”, Tom Aston, KPMG UK financial services tax partner, warned implementation may have been made more difficult due to “the ambitious deadlines” imposed.
However, some have warned the absence of notable signatories, such as the United States, means some considerable work remains to be done.
The US enacted the Foreign Account Tax Compliance Act in July 2014 where overseas financial institutions must identify their American clients to the Internal Revenue Service on any account holding more than $50,000.
World sentiment on tax evasion is fast becoming that of non-approval; currently Luxembourg is making headlines as the European Commission (EC) investigates a suspect tax agreement between Luxembourg and Amazon while also pressing the European Union member on several other allegations involving over 300 global companies.
The EC is also investigating two other Member State countries, Ireland and Malta, with their involvement in such tax avoidance schemes and also accused The Netherlands of granting such favourable conditions or state aid to companies.