At June's G20 summit in Mexico, the leaders of the world's
major economies released a joint declaration committing to lead
by example in implementing the practice of AIE. This has driven
AIE to the fore and made it a key part of political efforts to
tackle tax evasion through inter-governmental cooperation.
The debate has also been advanced by tax justice
campaigners, for whom exchange of information on request is not
satisfactory. They want to see AIE become the norm.
"The on-request model of tax information exchange agreements
is not sufficiently strong to tackle tax evasion," said John
Christensen, of the Tax Justice Network. "Automatic exchange of
information makes it possible to tax capital and not just
income and capital gains."
The OECD report on AIE states that the open
international architecture of today's world, with taxpayers
operating cross-borders while tax administrations remain
confined to their national borders, "can only be sustained
where tax administrations cooperate [and] one key aspect of
international tax cooperation is exchange of information
The report defines AIE as involving the systematic and
periodic transmission of bulk taxpayer information by the
source country to the residence country concerning various
categories of income, for example dividends, interest,
royalties, salaries and pensions.
According to that definition, Denmark has the highest number
of AIE relationships, sending information automatically to 70
countries. The report also shows that eight countries -
Australia, Belgium, Canada, France, Spain, Sweden, the UK and
US - sent more than one million records to other countries
within the latest 12 month period for which data is available
(this timeframe varies from country to country).
The OECD report lists the following benefits of AIE:
- It can provide timely information on non-compliance where
tax has been evaded either on an investment return or the
underlying capital sum.
- It can help detect cases of non-compliance even where tax
administrations have had no previous indications of
- The deterrent effect of AIE increases voluntary
compliance and encourages taxpayers to report all relevant
- It helps to educate taxpayers in their reporting
obligations, increases tax revenues and leads to
Confidentiality of information
One key concern with AIE is that the information being
exchanged is kept confidential and is used only for the
purposes allowed and intended. Therefore, from the sending
country's perspective, confidentiality and reciprocity,
acknowledgement and feedback were the components identified as
vital for successful and effective implementation.
The second OECD report seeks to provide guidance on how tax
administrations protect the confidentiality of taxpayer
information domestically and when using EoI instruments.
"Both taxpayers and administrations have a legal right to
expect that information exchanged under EoI partners have
adequate safeguards to protect the confidentiality of the
information that is shared," said the report.
"Confidentiality is a cornerstone for all functions carried
out within the tax administration and as the sophistication of
the tax administration increases, the confidentiality processes
and practices must keep pace," the report added.
Pascal Saint-Amans, the OECD's director of the Centre for
Tax Policy and Administration, said AIE is not intended to
become a new standard, but that it is a growing practice among
OECD and non-OECD countries and, as recommended by the G20, he
expects a number of countries to move in this direction.
"The OECD has been working on AIE for decades to assist
those of its members which use this means to exchange - on all
or some elements of income," said Saint-Amans. "In a nutshell,
we work on AIE to assist those countries which are willing to
use it, whether they are OECD members or not. We also
understand that the agreements the US will be signing shortly
to implement Model 1 under FATCA will boost AIE."
When it comes to protecting taxpayer confidentiality,
Saint-Amans said the Global Forum on Transparency and Exchange
of Information will be key.
"I see a big role for the Global Forum in checking the
quality of the protection of confidentiality in the coming
months and years," he said. "As you can see, we have also
issued a report on this issue and we expect the Global Forum to
also endorse it, giving it even greater acceptance."
He also said treaty renegotiation is not necessary for the
"Finally, there is no need to renegotiate treaties to
implement AIE. For those who want to do it, Article 26 as
currently drafted is good enough for that," said Saint-Amans.
"Moreover, the Multilateral Convention on Mutual Assistance can
also be a good legal instrument to implement AIE. You may have
noticed the growing interest in this instrument - there are now
37 signatories. We expect many more countries to sign it during
the next Global Forum meeting in Cape Town at the end of