Automatic exchange of information(AEOI):
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Automatic exchange of information involves the systematic and periodic transmission of taxpayer information by the source country to the residence country concerning various categories of income.
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This automatic exchange of information(AEOI) is to be carried out under the Common Reporting Standard (CRS).
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CRS is the global reporting standard for such exchange of information, which takes care of aspects such as confidentiality rules and data safeguards.
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The CRS has been developed by the Organisation for Economic Cooperation and Development(OECD).
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However,under the agreement,India will not receive information on bank accounts of Indians in Switzerland prior to 2018.
Need :
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Tax payers operate cross border whereas tax administration is limited to national borders. This has helped tax evasion by shifting money to other countries by citizens. Both tax evasion and tax avoidance have escalated; facilitated by quick transfer of income from one country to another.
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Vast amounts of money are kept offshore and go untaxed to the extent that taxpayers fail to comply with tax obligations in their home jurisdictions.
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Tackling this cross national transfer of money to avoid and evade taxes indicate that national efforts are not enough to fight black money. Hence there is the need for tax cooperation and tax information exchanges between countries.
Significance :
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Enables the discovery of formerly undetected tax evasion.
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Enable governments to recover tax revenue lost to non-compliant taxpayers, and will further strengthen international efforts to increase transparency, cooperation, and accountability among financial institutions and tax administrations.
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Generate secondary benefits by increasing voluntary disclosures of concealed assets and by encouraging taxpayers to report all relevant information.
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