G-8 agrees to exchange tax information

Leaders of the G8 countries agreed to steps to improve tax transparency at their summit in Lough Erne, Northern Ireland, on Tuesday. The eight-step proposal was submitted by the United Kingdom and agreed to by fellow G8 members Canada, France, Germany, Italy, Japan, Russia and the United States. The countries also agreed, in a separate declaration, that “[t]ax authorities across the world should automatically share information to fight the scourge of tax evasion.”
Under the agreement, the countries endorse core principles that the agreement describes as “fundamental to the transparency of ownership and control of companies and legal arrangements”. The countries agree to share basic company and beneficial ownership information and to “ensure that their relevant authorities can rapidly, constructively, and effectively provide” such information when requested by other countries.
The G8—except reportedly Germany and Russia—also agreed to publish “action plans” on corporations and trusts used to evade taxes. Companies will have to submit information about their ownership to a central registry. The agreement calls for sanctions to be imposed on companies, financial institutions and regulated businesses that do not comply with their obligations, and calls for those sanction to be “robustly enforced”.
The United States published its action plan on Tuesday. It calls for the United States to “advocate for comprehensive legislation to require identification and verification of beneficial ownership information at the time a company is formed.”
OECD report
The agreement follows the issuance of a report prepared for the G8 by the Organisation for Economic Co-operation and Development that calls for global automatic exchange of tax information.
Tax transparency has become a hot topic around the world as governments attempt to find ways to capture tax revenue that is currently going unpaid by residents who keep their money offshore. The G8 requested the report to see how jurisdictions could build on the recent global developments in information exchange.
The report notes that offshore tax evasion requires a global solution; otherwise, taxpayers will simply move their money to jurisdictions that do not report their information.
The report aims to describe the factors that would make for a successful model for automatic exchange of information, and it lists four steps that it says countries must take to put such a model into practice:

1. Enacting broad framework legislation to facilitate the expansion of a country’s network of partner jurisdictions;
2. Selecting (or where necessary entering into) a legal basis for the exchange of information;
3. Adapting the scope of reporting and due-diligence requirements and co-ordinating guidance; and
4. Developing common or compatible IT standards.

The report says that there already exists a “clear legal basis for comprehensive automatic exchange with strict safeguards protecting confidentiality” and points to the Convention on Mutual Administrative Assistance in Tax Matters, which currently has 53 signatories; EU Directives; and various bilateral tax treaties as evidence of that legal basis.
The report also points to the recent intergovernmental agreements under the US Foreign Account Tax Compliance Act as a potential useful model for a global standard.