In the context of a country with a well-funded tax authority, the automatic exchange of bank information can reduce possibilities for tax evasion, concludes the EU Tax Observatory in its latest working paper, published on Wednesday 24 July. This automatic exchange would also make the tax base less elastic and potentially increase optimal rates.
However, realising the full potential of this new policy may require additional investment. The provision of information by third parties is not in itself sufficient to eliminate tax evasion. Interventions that supplement this reporting, such as sending letters or targeted audits, can boost compliance with the rules. To systematise these interventions, tax authorities may need to invest in improving their technology in order to match taxpayers’ returns to the OECD common reporting standard (CRS).
The EU Tax Observatory study focused on directly held offshore wealth. To deepen this analysis, it believes it would be useful to estimate the compliance response of wealth held indirectly, through holding companies, trusts or foundations, for example. Improved cross-border audit procedures should also be designed and implemented to ensure full compliance by offshore banks.
Read the working paper: https://aeur.eu/f/d6u (Original version in French by Anne Damiani)