The endorsement of the 'Declaration on Automatic Exchange of Information in Tax Matters' by 47 countries under the aegis of OECD on Tuesday will come as a boost for India which is stepping up pressure on Switzerland to share details on alleged black money stashed away by Indians there.
The Organisation for Economic Cooperation and Development (OECD), the global body that frames economic policies and conventions against tax frauds, said the latest declaration commits countries to implement a new single global standard on automatic exchange of information.
The standard agreed upon by the 47 nations will help clamp down on bank secrecy practices and ensure that they work towards full disclosure of information on tax evaders and financial criminals pertaining to any national jurisdiction.
"The declaration on automatic exchange of information in tax matters was endorsed during the OECD's annual Ministerial Council Meeting in Paris by all 34 member countries along with Argentina, Brazil, China, Colombia, Costa Rica, India, Indonesia, Latvia, Lithuania, Malaysia, Saudi Arabia, Singapore and South Africa," OECD said in a statement issued last night.
Switzerland, long perceived as a safe haven for stashing away untaxed money, is an OECD member.
"The standard, which was developed at the OECD and endorsed by G20 finance ministers last February, obliges countries and jurisdictions to obtain all financial information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis," said the statement.
Such a protocol was required between the countries as tax crimes rob countries of their genuine revenues, OECD said.
"Tax fraud and tax evasion are not victim less crimes. They deprive governments of revenues needed to restore growth and jeopardise citizens trust in the fairness and integrity of the tax system," OECD Secretary General Angel said.
The commitment by so many countries to implement the new global standard and to do so quickly is another major step towards ensuring that tax cheats have nowhere left to hide, Gurria said.
Switzerland had signed the mutual exchange of tax information protocol, which aims to end the long protected bank secrecy of suspect clients, late last year while India has been onboard this convention for few years now.
As part of cracking down on instances of tax evasion, India is making efforts to gather information from Switzerland on entities suspected parking illicit money in Swiss banks.
In this regard, Finance Minister P Chidambaram has written letters to his Swiss counterpart Eveline Widmer Schlumpf and has reiterated that India would continue to take a position at the Global Forum about Switzerland lacking legal and regulatory framework for an effective exchange of information.
Meanwhile, OECD is expected to issue a detailed commentary on the new standard, as well as technical solutions to implement the actual information exchanges, during a meeting of G20 finance ministers in September 2014.
The G-20 governments have mandated the OECD-hosted Global Forum on Transparency and Exchange of Information for Tax Purposes to monitor and review implementation of the standard.
More than 60 countries and jurisdictions have now committed to early adoption of the standard and additional Global Forum members are expected to join this group in the coming months, the OECD said.