OECD issued new standard to combat black money; India to follow new standard for tracking black money

The Organization for Economic Cooperation and Development (OECD) revealed a new “game-changing” mechanism to combat the menace of offshore tax evasion. Till now, 42 countries including India adopted a new global standard for automatic exchange of information on offshore tax evasion and committed to share tax details.

• Plan:  for automatic exchange of information on bank accounts holding more than $250,000 as a “real game changer” that would deter evasion and help tax authorities identify citizens hiding money offshore.
• Objective: To smooth the automatic exchange procedures those are used to crack cases of offshore tax evasion and illegal stashing of money.

Highlights of the new tax standards set by the Global economic body O.E.C.D.

• Governments would automatically share information on taxpayers’ offshore bank and brokerage accounts with foreign tax authorities.
• Banks, brokers and some insurers and investment funds would have to report residents’ account balances as well as interest, dividends and other investment income to their government. The government would then make that information available automatically to any other government that had signed the information-exchanging agreement.
• Financial companies would also be required to identify the ultimate beneficiaries of shell companies, trusts and similar legal arrangements that now can be used to evade taxes.

• OECD will formally present the standard for the endorsement of G20 finance ministers during a February 22-23, 2014 meeting in Sydney, Australia.

In other words, this new standard on automatic exchange of information will build up international tax co-operation and place governments back on a more even footing as they seek to protect the integrity of their tax systems and fight tax evasion.

Month: Current Affairs - February, 2014