U.S. Failure to Commit to Information Exchange ‘a Problem'

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By Rick Mitchell

Sept. 27 — U.S. reluctance to commit to the OECD's international standard for the automatic exchange of banking information is a problem, but that doesn't mean the country will be “the next Switzerland,” the organization's top tax official told Bloomberg BNA.

More than 100 countries and jurisdictions have agreed to exchange information under the common reporting standard, part of the Organization for Economic Cooperation and Development's automatic exchange of information initiative to battle tax evasion set to begin in many countries next year.

In addition, 84 countries and jurisdictions have signed on to the OECD's CRS Multilateral Competent Authority Agreement, which spells out the practical details of implementing the common reporting standard. The U.S. endorsed the OECD declaration on automatic exchange of information in tax matters, issued in May 2014, but that included no specific timeline (108 TMIN, 6/5/15).

It hasn't committed to either the standard or the MCAA.

The European Commission included the U.S. on its recent scoreboard to begin screening nations for a tax haven blacklist, citing U.S. failure to sign up for the CRS (180 TMIN, 9/16/16).

Pascal Saint-Amans, head of the OECD's Center for Tax Policy and Administration, said the organization is identifying countries that haven't committed, a group that includes the U.S.

‘Specific Situation.'

The OECD official said the U.S. is in a unique situation because it exchanges information “massively” through the Foreign Account Tax Compliance Act and already does some automatic exchange of information, but not based on the CRS standard.

“Yes, that is clearly a problem that we are not hiding and that the U.S. is aware of,” he said. “But we cannot say the U.S. is doing nothing, or that the U.S. will be a new Switzerland. That will not be the case at all, contrary to what some are saying.”

The European Commission said a listing on its scoreboard shouldn't be taken as an indicator that a country will end on the final blacklist in 2017, as the scoreboard was just the first of three steps. However, some EU countries and European Parliament members have said they favor labeling the U.S. an uncooperative nation on tax matters, primarily due to its failure to commit to the CRS.

Switzerland, which the OECD has in the past cited frequently as uncooperative in tax transparency matters, on Sept. 26 deposited its ratification instrument for the Convention on Mutual Administrative Assistance in Tax Matters, which the OECD said is a key step for its commitment to implement the CRS in 2018.

Saint-Amans said the OECD is working with all countries and jurisdictions that have committed to begin automatic exchange in either 2017 or 2018 to identify whether they meet conditions to be compliant. They have “several pieces of homework to do,” including changes in their domestic legislation and negotiating bilateral or multilateral agreements.

‘Objective Criteria' for OECD List

Countries and jurisdictions have to “nominate,” through the MCAA, the countries with which they will exchange information. When two countries and/or jurisdictions nominate each other, that triggers the activation of Article 6 of the mutual assistance convention. The OECD Global Forum on Transparency and Exchange of Information for Tax Purposes has a “staged process” to monitor countries' progress to implement their commitments, Saint-Amans said.

“We are monitoring and checking whether all the possible relevant partners are nominated so that we level the playing field and that we have a clear view. These are things that we will make public,” he said.

Some practitioners have said U.S. reticence to commit to a specific time frame for implementing global automatic tax information exchange could cause problems for U.S. financial institutions, particularly trusts.

Saint-Amans declined to say whether the U.S. could end up on the OECD's own list of countries and jurisdictions failing to meet its transparency criteria, which it plans to release for the July 2017 Group of 20 nations' summit in Germany.

“We have objective criteria which have been shared,” he said.

To contact the reporter on this story: Rick Mitchell in Paris at correspondents@bna.com

To contact the editor responsible for this story: Rita McWilliams at rmcwilliams@bna.com

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