In November 2021 the Global Forum on Transparency and Exchange of Information for Tax Purposes issued the Toolkit for the Implementation of the Standard for Automatic Exchange of Financial Account Information. The toolkit aims to assist developing countries in the implementation of the international standard for the automatic exchange of financial account information, by giving practical guidance on the appropriate strategy to adopt and set up the required procedures to allow effective participation in the exchange of financial account information.
The procedures set out in the toolkit will also be useful in setting up other types of tax information exchange including the automatic exchange of Country by Country Reports under Action 13 of the action plan on Base Erosion and Profit Shifting (BEPS). The automatic exchange of tax information can be used by jurisdictions to enforce their domestic tax rules in relation to cross-border transactions.
The international standard requires the annual exchange of information, in a pre-defined format, on the financial accounts of individuals and entities that are resident in a foreign jurisdiction. The types of information exchanged can cover the details of the financial accounts and details of the account holder. A commitment to exchange financial account information has so far been made by 120 jurisdictions.
The standard requires the conclusion of international agreements providing for information exchange between the jurisdictions under the common reporting standard; domestic rules on the collection and reporting of information by financial Institutions; setting up IT and administrative arrangements for receiving and exchanging the information; and safeguards for confidentiality and data security.
The toolkit points out that developing countries are disproportionately exposed to the risks of international tax evasion. They therefore have a greater need for access to systems of international information exchange, to help fight against tax evasion and other illicit financial flows (IFFs). Developing countries can therefore generate additional tax revenues by implementing the standard.
The toolkit provides an overview of the implementation of the standard and the procedures for monitoring and review processes. It also outlines the due diligence requirements and sources of information that jurisdictions could refer to when implementing the standard. The toolkit outlines the support available from the Global Forum Secretariat in the implementation process.
The toolkit looks at considerations for preparing domestic legislation and guidance, and considers the optional provisions where jurisdictions need to make a policy decision on including some of the options.
The toolkit considers how jurisdictions can effectively use the data received from exchange partners, looking at the receipt of the data; how the data is processed; data matching and data analysis. The effective analysis of the data using new technologies such as advanced analytics, machine learning, and artificial intelligence depends on an understanding of the impact of new technologies on existing processes such as compliance, audit and recovery. Effective use of data will require strong partnerships between business users, data analysts and IT.
