April 9, 2013: Tax Information Exchange among the G5 Countries
Foreign Account Tax Compliance Act (FATCA)
European Union's five largest economies to cooperate on tax evasion
Taking a page from the United States’ FATCA playbook, the United Kingdom, France, Germany, Italy, and Spain have announced an agreement to develop a multilateral tax information exchange methodology among the G5 countries. The agreement is expected to allow for the automatic exchange of financial information among the G5 countries and lays the groundwork for expanding multilateral automatic tax information exchange protocols to other European countries including the G8. Similar to FATCA, the information exchange will help identify and deter residents from evading local tax and promote enhanced cross border financial information reporting.
The G5 will base the multilateral tax information exchange pilot on the Model Intergovernmental Agreement (IGA) previously developed between the U.S. and the G5; an exchange designed to reduce the cost of compliance for financial institutions and governments already developing processes, procedures, and systems capability to comply with the Model IGA. The multilateral pilot echoes recent comments from the U.S. Treasury to develop a global standard to facilitate the automatic exchange of tax information among participating jurisdictions. The agreement also builds on recent agreements the U.K. has reached with the Isle of Man, Guernsey, and Jersey, along with current discussions with between the U.K. and Overseas Territories.
Since its inception, FATCA has been a tension point between the U.S. and many jurisdictions due to privacy concerns related to cross border financial information reporting. However, the U.S. has made great strides in working with many jurisdictions to develop alternative mechanisms to facilitate compliance and enable tax information exchange to improve international tax compliance. This latest step further bolsters the international community’s interest to obtain and share tax information globally; enabling jurisdictions to monitor and promote tax compliance by its tax residents.
Deloitte will release further details on the content of the recent G5 agreement as they are released and analyzed, and as usual, we will keep you up to date with any developments as it relates to FATCA and global tax information exchange.
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