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Why the OECD must improve the model for information exchange

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The OECD’s tax chief says the organisation is the standard setter when it comes to promoting tax information exchange and tackling tax avoidance, but it’s a bold claim to make when the standard it is advocating relies on a flawed model.

Speaking at International Tax Review’s inaugural Tax and Transparency Forum last week, the OECD’s head of tax policy and administration, Pascal Saint-Amans, said when it comes to improving tax administration and tackling tax avoidance in developing countries, the OECD is leading the way.

Saint-Amans emphasised the importance of including developing countries in the process of establishing a global standard for tax information exchange, if the standard has any chance of working effectively.

However, Saint-Amans also said that exchange of information upon request, a system much criticised by tax justice campaigners, is the only standard as far as the OECD is concerned.

The Tax Justice Network, also represented at the forum, believe the information exchange upon request model is flawed because a country needs to have knowledge of a case of tax evasion before it can begin requesting the relevant information from treaty partners.

And despite acknowledging that there is a growing international practice of automatic information exchange, which is now the preferred option of the G20, and is being implemented by the US under FATCA, Saint-Amans said there is no intention to change the OECD model to reflect this.

The OECD’s Global Forum has done some valuable work in tackling tax haven abuse and developing tax information exchange around the world, and Saint-Amans is correct in saying that it would be a huge task to get its members to renegotiate all their existing tax treaties to incorporate automatic information exchange.

Saint-Amans also warned that pushing states too far too soon on transparency could lead to them pulling out of the discussion altogether, and there is probably some merit in this argument too.

But, if automatic information exchange truly is being recognised internationally as a more effective model, then surely, if the OECD is proclaiming itself to be the leading global organisation in improving tax information exchange and tackling tax abuse, it should be open to the idea of an improved model for achieving this.

While recounting the inception of the OECD’s Global Forum on Tax Transparency and Exchange of Information, Saint-Amans described how far countries have come in terms of tax information exchange in a short time, where even as recently as 2009 it was incomprehensible that some states would agree to share tax information but now have a network of tax information exchange agreements in place.

If the landscape can change so significantly in that time, thanks in no small part to the OECD, then there is a chance for automatic information exchange to become the global standard, but the OECD must keep setting its sights high and not settle for something that stirs rather than rocks the boat.

FURTHER READING

Christensen: “Inexorable” move to automatic information exchange

EXCLUSIVE: Why tax justice campaigners and the OECD are not seeing eye to eye

Country-by-country reporting : panacea or pipe dream?

TJN and ICC demand improvements to peer review process

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