TRANSPARENCY AND EXCHANGE OF INFORMATION – SOME NUMBERS
INTRODUCTION
The Global Forum on Transparency and Exchange of Information for Tax Purposes (The Global
Forum) comprises 126 members all of which are on an equal footing. Members include all OECD
countries, all G20 countries, international financial centers and an increasingly large number of
developing countries. Currently, around 50% of its members are developing countries. The Global
Forum’s mandate is to ensure the effective implementation of the international standards of
transparency and exchange of information for tax purposes. It does this through a robust peer
review process, which commenced in 2010, and which covers all members and relevant nonmembers. It also supports efforts to address tax evasion by providing technical assistance to
members in implementing the standard and in making effective use of the global infrastructure for
information exchange.
The peer review is a two stage process. During Phase 1, a jurisdiction’s legal framework for
transparency and exchange of information is assessed. In Phase 2, the application of this framework
in practice is analysed. Where deficiencies are identified recommendations for improvement are
made. After completion of both Phases of the peer reviews, a rating is assigned which ranges from
Compliant, Largely Compliant, Partially Complaint or Non-Compliant.
The Global Forum’s peer reviews have had a substantial impact on the implementation of the
international standards around the world. Their effects can be seen in different areas:
 improvements in transparency through better domestic legislation;
 a significant increase in the volume of information exchanged and in the quality and speed
at which it is exchanged;
 a rapid expansion in the network of agreements for international co-operation and in
resources devoted to exchange of information; and
 a substantive impact on tax revenues.
Undergoing a peer review process has several spin off benefits in the domestic context also. The
reviewed countries are under pressure to examine their domestic legislation, network of agreements
and infrastructure available for effective exchange of information and in most cases spurs much
needed reform which may be otherwise stuck. Improvements in the framework and infrastructure
enables better information is available and accessible to tax administrations regarding entities and
taxpayers in their own jurisdiction even as it opens doors for international cooperation.
These improvements affect both the “supply side” of international tax co-operation – with more and
more jurisdictions improving their legislation and practices to make more and higher quality
information available over a larger network of treaty partners and the “demand side” – reflected in
the growing number of requests which many jurisdictions are making. Taken together these
developments have enhanced many countries’ abilities to combat tax evasion and have resulted in
the recovery of large amounts of tax.
This note looks at these developments from a supply and demand perspective and outlines some of
the results achieved by countries that actively leverage the improvements in global transparency
that have occurred in the last five years.
THE SUPPLY SIDE
IMPROVING DOMESTIC TRANSPARENCY
To date 105 jurisdictions have completed their Phase 1 reviews and 71 have undergone Phase 2
reviews. Jurisdictions are following-up on the Global Forum recommendations by amending or
introducing appropriate legislation.
A significant number of jurisdictions have improved their laws to ensure the availability of
accounting and ownership information, including abolishing bearer shares (e.g. Belgium, Seychelles,
the UK) immobilizing them, or, in the case of Uruguay, requiring the liquidation of bearer share
companies that do not comply with shareholder identification requirements. As a result the veil of
corporate secrecy is being lifted and it is no longer possible to hide behind anonymous shell
companies with impunity.
Jurisdictions have also acted to improve access powers to information under domestic laws, for
example by improving their access to bank information, and have improved procedures or
strengthened exchange of information units to ensure timely exchanges. For example, Switzerland
and Luxembourg, among others, have ended bank secrecy for EOI purposes and are now able to
exchange bank information with their treaty partners.
THE BOTTOM LINE
Overall, out of the 968 recommendations made, 92 Global Forum members
jurisdictions have reported having enacted, or proposed, changes to their laws and
practices to implement around 500 recommendations. These improvements in
domestic transparency around the world have paved the way for increased
international cooperation and a rapid growth in exchange of information in tax
matters.
EXPANDING EXCHANGE OF INFORMATION NETWORKS
The network of international agreements providing for cross-border tax co-operation has also
expanded greatly over the past 5 years.
TIES THAT BIND
The network of international agreements providing for cross-border tax cooperation has expanded greatly over the past ten years. The table below shows the
number of agreements signed by Global Forum members that are based on the
Model Tax Information Exchange Agreement (TIEA) or updated Article 26 of the
OECD Model Tax Convention 2005. As the table shows, members of the Global
Forum have signed more than 1600 bilateral agreements since 2005. The number
of EOI relationships has also increased due to the growing number of jurisdictions
which have joined the Multilateral Convention on Mutual Administrative
Assistance in Tax Matters (MAC) and other regional multilateral instruments
resulting in more than 3000 new EOI relationships to the standard. With this vast
network of EOI agreements in place, there now exists a robust infrastructure for
information exchange which jurisdictions can use to enhance co-operation and
facilitate timely and effective EOI.
Figure 1: EOI relationships established since 2005 by Global Forum members
Many international finance centres are members of the Global Forum and are playing a full part in
this expansion of the international EOI network and in enhancing domestic transparency.
BEING A GOOD PARTNER
The Cayman Islands, Jersey and the British Virgin Islands (BVI) had less than 20 international EOI
relationships between them at the end of 2008 and now have more than 200.
EOI RELATIONSHIPS: CAYMAN ISLANDS, JERSEY and BVI
250
212
200
180
150
100
81
103
106
2013
2014
89
64
50
50
16
0
2008
2009
2010
2011
2012
The improvements in countries’ domestic laws and the expansion in the international network of
agreements mean that more information is now available from more countries than ever before.
Moreover, information is now available from jurisdictions which traditionally had not been willing to
share information or certain types of information. Further, having an exchange of information
relationship does not require a Double Taxation Convention as this can also be achieved quickly and
efficiently through a TIEA or multilateral exchange of information instrument such as the MAC.
Despite this progress, many developing countries are still not sufficiently well connected into this
network. For example, African countries have on average only one quarter of the number of EOI
relationships that European countries have.
THE DEMAND SIDE
Many jurisdictions have geared up to make use of this new more robust structure for information
exchange and this is reflected in the fact that the volume of requests is increasing and the time
taken to respond to these is reducing, reflecting the increased emphasis and resources many
members are putting on exchange of information.
ADD IT UP
Taking a sample of 23 jurisdictions for which comparable data is available, the number of EOI
requests received increased by 81%, from just over 1500 to just under 3000, in the period from
2009 to 2012. This figure is even more pronounced for those jurisdictions that have smaller
volumes of requests. Those jurisdictions with fewer than 100 requests in the first year of review
saw an average increase of almost 267% over the three years (sample of 16 jurisdictions).
Figure 2: number of EOI requests received by 23 jurisdictions for which comparative data
are available
ON THE MOVE
Five jurisdictions have recently undergone, or are undergoing, Supplementary reviews after their
Phase 2 reviews (Cyprus, Jersey, Luxembourg, Mauritius and the British Virgin Islands). In these
cases it is possible to measure the number of requests received at the first review and again at
the supplementary stage. For these jurisdictions the number of EOI requests received increased
sharply from one review to the other from a total of just over 2000 to just under 3500.
Figure 3: Comparison of EOI requests received by BVI, Cyprus, Jersey, Luxembourg, and
Mauritius in first review and in Supplementary review
No. of EOI request received (BVI, Cyprus,
Jersey, Luxembourg, Mauritius)
4000
3500
3000
2500
2000
1500
1000
500
0
First review
Suppl. review
A number of jurisdictions especially developing countries have indicated making their first requests
only very recently. The Philippines sent its first EOI requests in 2013 and Uganda in 2014. Other
developing countries such as India have started to use EOI much more intensively to combat tax
evasion.
Figure 4: Number of EOI requests made by India over time
India: outgoing EOI requests over time
884
Number of
Requests 900
800
647
700
600
500
385
400
300
200
100
0
29
2008
46
2009
92
2010
2011
2012
2013
Financial Year
Unfortunately some other developing countries have been slower to take advantage of the
improved international environment. India made more requests in 2013 that the whole of Africa has
made since the Global Forum commenced its peer review process in 2009.
BOTH SIDES NOW!
SHOW ME THE MONEY
A large number of EOI agreements have recently come into force and are only now starting to be
used. The full effect of these agreements will only become apparent over time. Moreover, statistics
on the impact of these agreements are hard to come by as only a handful of countries make this
data public. However, some members of the Global Forum are already reporting that the use of EOI
agreements has enabled them to recover significant amounts of tax which had been previously been
evaded. For example, Sweden has been very active in using its new EOI agreements to combat
international tax evasion with impressive results as shown below.
Swedish results (2010-2014)
No. of EOI requests
Tax revenue recovered due to EOI requests
Total tax effects due to EOI requests and
Voluntary Disclosure
396
EUR 130 million
EUR 330 million. (of which EUR 200 million. in
voluntary disclosure)
In addition Sweden has been able to track funds flowing back to Sweden from a number of
jurisdictions after it signed EOI agreements with them in line with the international standard (“licit
flows”!). The table below gives information on funds flowing back to Sweden from Luxembourg and
Switzerland, among others, after EOI arrangements in line with the international standard were put
in place in 2010 and 2011.
Net cash inflow to Sweden from EOI countries, Switzerland
and Luxembourg
4,000
3,500
3,000
SEK million
2,500
TIEA
countries
2,000
1,500
Switzerland
1,000
Luxembourg
500
0
-500
2005
2006
2007
2008
2009
2010
2011
2012
2013
Year
Australia is another jurisdiction which has sought to measure the impact of its EOI programme. The
panel below shows the results for 2013.
No. of EOI requests
Total tax recovered
Australian results (2013)
400 from ten countries
459 million Australian dollars (about 326 million euros) (equals
approx. 800 000 per exchange)
A number of developing countries are also beginning to report success stories. The Philippines
recovered more that $1 million in tax in 2014 from just two requests. South Africa, meanwhile,
collected $62 million in a settlement from just one taxpayer as a result of exchange of information
AEOI - WE’RE NOT FINISHED YET
The increase in the use of voluntary disclosure programs by taxpayers is also linked to the increase in
tax transparency worldwide and the deterrent effect of improved transparency and exchange of
information. It is expected that the success of voluntary disclosure programs will continue to grow
with the adoption and the implementation of the new international automatic exchange of
information standard (AEOI) worldwide.
In France, as at mid-September 2014, 31 000 cases had been processed under the voluntary
disclosure program, resulting in the recovery of EUR 1.85 billion. In the Netherlands, in the ten
months up to 1 July 2014, more than 12 000 taxpayers have voluntarily disclosed an estimated total
amount of EUR 6 billion to avoid penalties. Approximately EUR 900 million in taxes is expected to be
recovered. Reasons provided for disclosure include increased transparency and the move towards
AEOI.
CONCLUSION
There is a significant focus on the problem illicit flows in the literature and much less
emphasis on solutions. EOI offers a practical way of combatting these flows and bringing
some of this money home. However, there are still too few requests being made,
particularly by developing countries. Many of these countries are missing an opportunity to
supplement their audit and transfer pricing work with requests for information which may
lead to significant tax recoveries. Several myths regarding secrecy jurisdictions and the cost
of EOI persist to this day and need to be challenged. The new global EOI infrastructure,
reflecting improvements in transparency worldwide and a massive expansion of EOI
networks, is ready to be used and some impressive results are already emerging. The
success stories described here demonstrate the real impact of EOI where countries fully
exploit this new international infrastructure. The implementation the new standard on
AEOI around the world will pave the way for even greater improvements in international
cooperation and provide further support for countries efforts to control illicit flows and
prevent tax evasion. Together with other international organisations such as the World
Bank Group the Global Forum is already assisting a number of developing countries to
implement the new standard so that all countries can participate in its benefits.