OECD: Implementation of tax transparency initiative (AEOI Initiative) delivering concrete and impressive results

International efforts to improve transparency via automatic exchange of information on financial accounts are improving tax compliance and delivering concrete results for governments worldwide, according to new data released last 7 June by the OECD.

More than 90 jurisdictions participating in a global transparency initiative under the OECD’s Common Reporting Standard (CRS) since 2018 have now exchanged information on 47 million offshore accounts, with a total value of around EUR 4.9 trillion.

The Automatic Exchange of Information (AEOI) initiative – activated through 4,500 bilateral relationships – marks the largest exchange of tax information in history, as well as the culmination of more than two decades of international efforts to counter tax evasion.

“The international community has brought about an unprecedented level of transparency in tax matters, which will bring concrete results for government revenues and services in the years to come,” according to OECD Secretary-General Angel Gurria, unveiling the new data prior to a meeting of G20 finance ministers in Fukuoka, Japan. “

The transparency initiatives we have designed and implemented through the G20 have uncovered a deep pool of offshore funds that can now be effectively taxed by authorities worldwide. Continuing analysis of cross-border financial activity is already demonstrating the extent that international standards on automatic exchange of information have strengthened tax compliance, and we expect to see even stronger results moving forward,” Mr Gurria said.

Costs of full implementation

Voluntary disclosure of offshore accounts, financial assets and income in the run-up to full implementation of the AEOI initiative resulted in more than EUR 95 billion in additional revenue (tax, interest and penalties) for OECD and G20 countries over the 2009-2019 period. This cumulative amount is up by EUR 2 billion since the last reporting by OECD in November 2018.

Preliminary OECD analysis drawing on a methodology used in previous studies shows the very substantial impact AEOI is having on bank deposits in international financial centres (IFCs). Deposits held by companies or individuals in more than 40 key IFCs increased substantially over the 2000 to 2008 period, reaching a peak of USD 1.6 trillion by mid-2008.

These deposits have fallen by 34% over the past ten years, representing a decline of USD 551 billion, as countries adhered to tighter transparency standards. A large part of that decline is due to the onset of the AEOI initiative, which accounts for about two thirds of the decrease. Specifically, AEOI has led to a decline of 20% to 25% in the bank deposits in IFCs, according to preliminary data. The complete study is expected to be published later this year.

“These impressive results are only the first stock-taking of our collective efforts,” Mr Gurria said. “Even more tax revenue is expected as countries continue to process the information received through data-matching and other investigation tools. We really are moving closer to a world where there is nowhere left to hide.”