OECD Releases Draft Rules on Disclosing CRS Avoidance Schemes

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By Sony Kassam

The OECD is seeking public input on tax rules requiring taxpayers to disclose schemes that circumvent the common reporting standard—a legal framework designed for governments to combat tax evasion.

The Organization for Economic Cooperation and Development released a consultation document setting out model rules for mandatory disclosure on common reporting standard avoidance arrangements and offshore structures.

The common reporting standard (CRS) establishes information-sharing requirements between participating countries through the automated exchange of financial data on an annual basis between governments. Historically, anyone seeking to evade tax could hide their wealth in offshore accounts. However, the CRS aims to provide governments with information on their citizens’ overseas activity, with financial institutions disclosing data on foreign account holders to the relevant tax authorities.

“The experience of a number of tax administrations and the information disclosed through the OECD’s CRS disclosure initiative show that a number of advisers and service providers are actively marketing schemes designed to circumvent the CRS reporting requirements,” the OECD’s Dec. 11 press release said.

Group of 7 finance ministers on May 13 called on the OECD to begin discussing ways to address these schemes. As such, the OECD will incorporate stakeholder comments in its report to the G7 finance ministers.

The mandatory disclosure rules, inspired by Action 12 of the OECD’s 15-item action plan to combat base erosion and profit shifting, are aimed at “promoters and service providers with a material involvement in the design, marketing or implementation of CRS avoidance arrangements or offshore structures,” which conceal beneficial ownership.

The document is divided into five chapters that define CRS avoidance arrangements and offshore structures, explains who would be required to disclose such arrangements and structures, sets out what information is needed in the disclosure, and suggests possible approaches to penalties, which would “generally be determined by each country in light of its particular circumstances.”

To contact the reporter on this story: Sony Kassam in Washington at skassam1@bloombergtax.com

To contact the editor responsible for this story: Kevin A. Bell at kbell@bloombergtax.com

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