A gathering of 34 members of the Organisation For Economic Co-operation and Development has declared that bank secrecy for tax reasons is near an end as a raft of countries agreed yesterday to commit to automatic exchange of information.

A gathering of 34 members of the Organisation For Economic Co-operation and Development has declared that bank secrecy for tax reasons is near an end as a raft of countries agreed yesterday to commit to automatic exchange of information.

The Declaration on Automatic Exchange of Information in Tax Matters was endorsed during the OECD’s annual Ministerial Council Meeting in Paris by all 34 member countries, along with Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa, a statement from the Paris-based OECD said.

The declaration commits countries to implement a new single global standard on automatic exchange of information. The standard, which was developed at the OECD and endorsed by G20 finance ministers last February, obliges countries and jurisdictions to obtain all financial information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis.

Switzerland, which is one of the most prominent jurisdictions operating as an offshore financial centre and under heavy pressure to change its bank secrecy laws, is among the nations reported to have signed the agreement.

“The Swiss Bankers Association (SBA) has accepted the automatic exchange of information as a global standard for over one year and contributed constructively to the drafting process at OECD level. It is not a surprise for the banks in Switzerland that our country will join the OECD declaration on the automatic tax information exchange. The banks in Switzerland are willing to adopt the automatic exchange of information along with other financial centres, provided that the exchanged information is only applied for tax purposes. Reciprocity should apply and structures like trusts be part of information exchange. Furthermore the banks expect fair solutions for untaxed assets of the past in order to implement the standard with each country,” the SBA, which represents over 300 banks located in Switzerland, said in a statement emailed to this publication yesterday.

As the OECD statement highlights, jurisdictions in Asia are among those that have signed up to the Declaration.

“Tax fraud and tax evasion are not victimless crimes: they deprive governments of revenues needed to restore growth and jeopardise citizens’ trust in the fairness and integrity of the tax system,” OECD Secretary-General Angel Gurría said. “Today’s commitment by so many countries to implement the new global standard, and to do so quickly, is another major step towards ensuring that tax cheats have nowhere left to hide.”

The OECD will deliver a detailed Commentary on the new standard, as well as technical solutions to implement the actual information exchanges, during a meeting of G20 finance ministers in September 2014. G20 governments have mandated the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes to monitor and review implementation of the standard.

More than 60 countries and jurisdictions have now committed to early adoption of the standard, and additional Global Forum members are expected to join this group in the coming months.

Defenders of offshore tax jurisdictions, such as the Washington DC-based CATO Institute, argue that such places perform a global economic role by putting other, higher-tax jurisdictions under pressure to keep tax rates lower than they would otherwise be. Critics say these places siphon off much-needed revenues from indebted nations and distort global trade and investment.

Singapore
Separately, Singapore became this week the latest country to reach an agreement with the US to implement the Foreign Account Tax Compliance Act. The deal has been agreed in substance and is expected to be completed in the second half of 2014, the Singapore Ministry of Finance said in a statement.

Under the Model 1 Inter Governmental Agreement, Singapore-based financial institutions will be required to report tax information about US account holders directly to the Inland Revenue Authority of Singapore, which will relay that information to the US Internal Revenue Service.