STEP recognises that a fair tax system must include effective measures to combat evasion and criminal or terrorist financing.
STEP has been invited to attend the next OECD Forum in April 2020 to discuss updating the Common Reporting Standard. A proposed updated Standard will be distributed for public comment early in 2020 and STEP will be feeding into the discussions on areas of practical difficulty for the industry.
STEP sits on the HMRC consultative group on the OECD Common Reporting Standard (CRS) and has provided guidance to STEP members on their obligations under the Foreign Account Tax Compliance Act (FATCA) and CRS.
OECD Common Reporting Standard (CRS)
On 15 July 2014, the Organisation for Economic Co-operation and Development (OECD) published the full version of the Standard for Automatic Exchange of Financial Account Information in Tax Matters. The document includes: Model Competent Authority Agreement; Common Reporting Standard; Commentaries. The Common Reporting Standard (CRS) 'calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis'. At present, more than 100 jurisdictions have publicly committed to implementation. STEP sits on both the HMRC consultative group and the Business and Industry Advisory Committee to the OECD (BIAC) on CRS.
In March 2018 the OECD released Model Mandatory Disclosure Rules (MDRs) to tackle CRS avoidance, more information on STEP’s views on the MDRs and how members can engage in national debates about the rules can be found here
Foreign Account Tax Compliance Act (FATCA)
FATCA is part of the US Hiring Incentives to Restore Employment Act (2010) and aims to combat tax evasion by US tax residents using foreign accounts.
Model 1 intergovernmental agreements (IGAs) have been adopted widely. Around 70 jurisdictions have formally signed Model 1 IGAs with the US.
It is important to recognise that FATCA potentially puts obligations on all trusts, whether or not they have any US connections, US assets or US income. In signing the Model 1 IGA, jurisdictions are agreeing to incorporate FATCA reporting requirements into their own tax code and take responsibility for enforcement.
The same basic framework to categorise trusts is used in all Model 1A-type IGA FATCA agreements including UK agreements with the Crown Dependencies and the Overseas Territories (CDOT), and the OECD Common Reporting Standard (CRS).