By Paul Gambles, Managing Partner MBMG Group
The Common Reporting Standard is part of a collection of international agreements, each carrying its own sinister acronym.
These agreements are designed to allow countries to swap information on people’s financial details, including the status of their bank accounts, life insurance policies, investment vehicles and holding companies engaged in investment or financial businesses.
The treaties and exchange of information instruments contain strict provisions that require information exchanged to be kept confidential and limit the persons to whom the information can be disclosed and the purposes for which the information may be used.
Automatic exchange of information has already begun, and by the end of last year 100 countries – including Australia – had already sent out their first files. Added to these, there are three countries which have signed up to exchanging information but haven’t yet completed technical implementation. Seven more have signed up in principle but haven’t yet completed the legislative to steps to start.
In reality, information exchange has been patchy. In 2018, participating countries sent information to 50 jurisdictions on average. However, whilst Australia exchanged with 55 jurisdictions, the bottom four countries only exchanged with 14 others between them. Russia wasn’t much keener, sending information to just 14 other tax authorities.
One notable absentee from the signatories to CRS is the United States. Ironically, the country which began the whole cross-border financial information trend with its FATCA law, has so far only agreed to reciprocate with three other countries. The US is therefore a tax haven for some.
Thailand is one of seven ASEAN countries which haven’t yet signed up to automatic exchange. Yet, along with Brunei, Cambodia and the Philippines, the Kingdom is part of the Global Forum on Transparency and Exchange of Information for Tax Purposes. This means that there’s a possibility – even a likelihood – that it will eventually join the others in swapping financial details of residents.
People living in Thailand will get some warning, though. After all, it’s not as simple as merely signing on the dotted line: the law has to be drafted and enacted, and certain technical requirements have to be met for automatic exchanges to take place. With elections coming up, this may even take a bit longer.
So, there’ll be plenty of time to prepare. To avoid any undue concern, it’s best to stay informed of how CRS progresses and how it works in practice. We’re certainly keeping a close eye on it. After all, forewarned is forearmed!