G20 leaders vow to have tax info exchange mechanism by 2017

The G20 leaders on Sunday committed to put in place a mechanism for automatic exchange of tax information between member countries by 2017, an issue which has been continuously raised by India at international fora to check the menace of black money.

The leaders of 20 developing and developed countries also endorsed the action plan to tackle Base Erosion and Profit Shifting (BEPS), which would be finalised in 2015, to make sure companies pay their fair share of tax. The G20 summit endorsed the Indian government’s line on the need for transparency and disclosure of tax information as Prime Minister Narendra Modi voiced support for a new global standard on automatic exchange to tackle the black money issue.‘To prevent cross-border tax evasion, we endorse the global Common Reporting Standard for the automatic exchange of tax information (AEOI) on a reciprocal basis. We will begin to exchange information automatically with each other and with other countries by 2017 or end-2018,’ the communique released after the end of two day G20 summit said.

Later, briefing media, India's G20 Sherpa Suresh Prabhu said: ‘Prime Minister has significantly made a strong pitch for (checking) black money. India is doing its very best to get it (back). This is very necessary because tax havens create possibility of erosion of tax.’ The G20 countries said they are taking steps to ensure fairness in the international tax system and to secure their revenue bases.

‘Profits should be taxed where economic activities deriving the profits are performed and where value is created,’ the communique said, adding that the BEPS action plan will be finalised by 2015. The BEPS initiative would ensure that tax is paid where profits are made.

The new framework of automatic exchange of tax information would mark a significant forward movement from the current practice of information exchange mostly on the basis of requests and only in the cases of suspected tax evasion or other financial crimes. The standard, once implemented, would allow governments to obtain detailed account information from their 

financial institutions and exchange it automatically with other jurisdictions on an annual basis.