OECD Facilitated the Exchange (AEOI) of 47M Accounts under CRS
The concept of reducing and eliminating offshore tax fraud and evasion is not unique to the United States. While the U.S. has implement FATCA (and entered into agreements with more than 110 counties), there is another rule for many countries outside of the U.S. It is referred to as CRS (Common Reporting Standard), which utilizes AEOI (Automatic Exchange of Information)
What is OECD’s Common Reporting Standard (CRS) & (AEOI)?
Several countries (excluding the IRS) have adopted the CRS in lieu of, or in addition to FATCA. CRS is facilitated through the OECD. There is a model agreement, which is then adapted and modified by each country that wants to participate. Some countries enter into both FATCA and CRS. This is why many clients will approach us with FATCA/CRS letter. These are letters used by the bank to gather all the necessary information they need to comply with both FATCA and the CRS.
As provided by the OECD:
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 47 million offshore accounts, with a total value of around EUR 4.9 trillion.
The Automatic Exchange of Information (AEOI) initiative – activated through 4,500 bilateral relationships – marks the largest exchange of tax information in history, as well as the culmination of more than two decades of international efforts to counter tax evasion. “The international community has brought about an unprecedented level of transparency in tax matters, which will bring concrete results for government revenues and services in the years to come,” according to OECD Secretary-General Angel Gurria, unveiling the new data prior to a meeting of G20 finance ministers in Fukuoka, Japan.
“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,” Mr Gurria said.
Voluntary disclosure of offshore accounts, financial assets and income in the run-up to full implementation of the AEOI initiative resulted in more than EUR 95 billion in additional revenue (tax, interest and penalties) for OECD and G20 countries over the 2009-2019 period. This cumulative amount is up by EUR 2 billion since the last reporting by OECD in November 2018.
Preliminary OECD analysis drawing on a methodology used in previous studies shows the very substantial impact AEOI is having 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 USD 1.6 trillion by mid-2008. These deposits have fallen by 34% over the past ten years, representing a decline of USD 551 billion, as countries adhered to tighter transparency standards.
A large part of that decline is due to the onset of the AEOI initiative, which accounts for about two thirds of the decrease. Specifically, AEOI 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.
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