But details of data sharing rules have still to be determined A proposed agreement on automatic sharing of tax data between governments, released by the Organisation for Economic Co-operation and Development (OECD), promises to extend the data exchanges included in the US anti-tax-evasion law Fatca to all participating governments – but the full details of how the process will work will not be decided until later this year. Previous efforts by the OECD, notably the Model Tax Convention, depended on voluntary information exchange. But the new OECD standard envisions the exchange happening automatically between signatory governments. The proposal follows a series of deals on information exchange, including the many intergovernmental agreements (IGAs) put in place to implement the requirements of Fatca. And while the sample agreement envisions bilateral exchanges, the OECD is hoping that it will be taken up as the basis for a multilateral exchange of tax information – a plan which 86 nations, including all G-20 members, have already committed to in principle, it noted. Previous moves in this direction have been hampered by some countries' desire to protect their own banking industries; an EU directive calling for automatic tax information sharing within the EU was not taken up universally, with Austria, Luxembourg and Belgium preferring to pay a withholding tax rather than force their banks to reveal customer names. Other progress has been partial at best – Liechtenstein agreed to disclose customer names and assets only after the embarrassing leakage of customer information on hundreds of depositors in 2008. And the OECD proposal is unlikely to clear the way by itself. Nick Matthews, a senior member of the forensic and corporate recovery practice at London regulatory consultancy Kinetic Partners, says: "On balance, [this is] slightly less than hoped but it is a step forward." The OECD has based its template closely on the Model 1 Fatca IGAs, in which national authorities collect information from their own banks and pass it on to the US, rather than the Model 2 IGA under which non-US banks report to the US directly. But there are still important differences that Matthews says need to be addressed, such as "the lack of a de minimis threshold for existing individual accounts. These will mean that firms cannot simply assume a 'read-across' and will need to get into the detail to ensure compliance." The OECD hopes to create a process of data exchange not through the existing web of bilateral agreements (such as IGAs, or the UK's similar agreements with its dependent territories) but through a multilateral agreement based on its common standard. But, Matthews adds, it is still unclear how this will happen: "Even the existing Model 1s do not sit perfectly with each other, and there are also differences between the US IGAs and the UK IGAs, adding to the complexity." Michael Edwards, chief counsel at the World Council of Credit Unions in Madison, Wisconsin, adds that privacy concerns may be another stumbling block. "Information sharing through a central hub is logical but it raises questions under various countries' privacy laws. One of the reasons it took Canada so long to sign a Fatca IGA was because of concerns about the Canadian Charter of Rights. Hopefully the IGA addresses the Canadian issues but with all the data breaches we have been having, any centralised hub will raise privacy concerns even if it is totally lawful." The lack of reciprocity in Fatca will make not only an OECD-type agreement, but any existing IGA, hard for US banks to implement. Fatca does not require US institutions to collect data on their non-US customers, but this collection is fundamental to IGAs, under which individual countries agree to mutual sharing of data with the US on the bank details of their citizens in the other's jurisdiction. Collecting this kind of information for foreign account holders in the US will require new legislation – but this was blocked when the Obama administration tried to introduce it as part of the 2014 budget. It would be possible, Edwards says, to introduce the requirements as administrative regulations – but without legal backing they would be open to challenge. Existing tax treaties have the force of law in the US, but they lack information-sharing requirements – and attempts to amend them to include these requirements have also been blocked by Republican senator Rand Paul, Edwards adds....
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