One effective tool to prevent and detect tax evasion, is the Automatic Exchange of Information (AEoI). With a pre-determined set of financial account information to be automatically exchanged between jurisdictions, it allows tax administrations to "see" across borders and localise potentially taxable income hidden offshore. In contrast to the exchange of information on request, where tax information needs to be explicitly requested by a tax authority and which is tied to a specific taxpayer or group of taxpayers, no such request is needed for the automatic exchange. Thus, tax administrations can regularly use this data to determine risk areas and to conduct audits and audit planning more systematically. Since its introduction, AEoI has proven efficient in making sure that taxpayers pay their rightful share and has contributed to bringing down bank secrecy globally.
However, to date it is mainly developed countries that benefit from AEoI. This is due to the complexity of setting up AEoI as it requires the introduction of national laws, international agreements, administrative processes, IT infrastructure as well as comprehensive data protection measures; all this proves particularly overwhelming for tax authorities with limited capacities. In addition to those operational issues, governments need to make a considerable number of strategic choices, such as the countries with which exchange relationships should be entered, which requires a comprehensive analysis.
Nonetheless, given the success of AEoI in the fight against tax evasion in many countries, an increasing number of developing countries is aiming to introduce AEoI. But this is not an easy task. Therefore, the Global Forum of the Organisation for Economic Co-operation and Development (OECD), the international body that supervises the effective implementation of AEoI, is providing extensive capacity development measures to partner countries. This capacity development ranges from individual support to countries in their implementation of AEoI to extensive guidance in the form of comprehensive toolkits that are available online.
One of these toolkits is the Toolkit on Effective Implementation of AEoI which was supported by German development cooperation. It aims to assist government officials from developing countries in implementing the AEoI standard and provides a strategic approach and relevant material to ease the implementation of AEoI. It contains an introduction to the standard, its key building blocks and an overview of the monitoring and peer review process. Additionally, it provides a hands-on implementation strategy for the standard and details the key considerations for jurisdictions when implementing the necessary international and domestic legal frameworks. It also gives an overview on how jurisdictions can ensure effective implementation, as well as details on how to ensure effective use of data received from exchange partners. Wherever possible, the toolkit includes best practice country approaches. Lastly, it contains model legislation as well as comprehensive information on voluntary disclosure programmes, a compliance framework and administrative organisation.