- Recently India has got the first set of Swiss bank account details of its nationals under a new automatic information exchange pact, a major milestone in the government’s fight against black money stashed abroad.
What is Automatic Exchange of Information (AEOI)?
- Automatic Exchange of Information (AEOI) is the exchange of information between countries without having to request it.
- Automatic Exchange of Information (AEOI) reduces the possibility for tax evasion.
- It provides for the exchange of non-resident financial account information with the tax authorities in the account holders’ country of residence.
- Participating jurisdictions that implement AEOI send and receive pre-agreed information each year, without having to send a specific request.
Benefits of Automatic Exchange of Information (AEOI):
- AEOI will enable the discovery of formerly undetected tax evasion.
- It will enable governments to recover tax revenue lost to non-compliant taxpayers, and will further strengthen international efforts to increase transparency, cooperation, and accountability among financial institutions and tax administrations.
- AEOI will generate secondary benefits by increasing voluntary disclosures of concealed assets and by encouraging taxpayers to report all relevant information.
- As new information is brought to light by AEOI, the importance of the current standard of Exchange of Information on Request (EOIR) will also increase.
About Common Reporting Standard
- The Common Reporting Standard (CRS), developed in response to the G20 request and approved by the OECD Council calls on jurisdictions to obtain information from their financial institutions and automatically exchange that information with other jurisdictions on an annual basis.
- It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and taxpayers covered, as well as common due diligence procedures to be followed by financial institutions.
About the Current Exchange of information
- According to the two Swiss agencies, India is among 75 countries with whom information on bank accounts will be shared this year — AEOIs were implemented with 36 countries last year.
- Current exchange of information is regarding financial accounts that are currently active as well as those accounts that were closed during 2018.
- The next exchange would take place in September 2020.
Source: Indian Express