China signs multilateral convention on tax matters - updated
A press release just in from the OECD:
China signed the Multilateral Convention on Mutual Administrative Assistance in Tax Matters at a ceremony today at the OECD. All G20 countries have now fulfilled the commitment they made at the Cannes G20 Summit to sign the Convention and move towards automatic exchange of information as the new, global standard.Read a TJN briefing paper on this convention, which is in fact a joint initiative by the OECD and the Council of Europe, here. In summary, we think that the Convention is a useful tool, with many positive aspects - though with a number of shortcomings too. Xinhua has its own shorter backgrounder here.
This is significant, because China has in the past seemed to have been rather wary of joining up with international initiatives on information exchange. And it's also significant because just two or three years ago, we at TJN felt as if we and only a very small band of others were lone voices in the wilderness, pushing as hard as we could against the OECD's line that it's nearly-useless 'on request' system of information exchange was the internationally accepted standard. Automatic information exchange was the way to go, we said, but we were dismissed as extremists. And now we have the OECD trumpeting:
"Tax authorities worldwide are moving from bilateral to multilateral cooperation and from exchange of information on request to automatic exchange of information. The Convention provides a comprehensive multilateral framework for such co-operation and complements other initiatives, such as the standardised multilateral automatic exchange model being developed by the OECD and its G20 partners."This is good news, though (as we so often say) there is still a very long way to go on transparency and information exchange.
Some additional points about this are worth noting.
First, alhough 56 states have now signed the convention, only about half of these have actually ratified it - it seems from OECD data that 29 have not yet done so, so it's not in force yet for them yet.
Second: this is, generically, a far more effective method than bilateral treaties. If all 56 were to ratify this convention that would be the equivalent of 3,080 ratified bilateral treaties.
What is now needed is a Protocol to establish a template for automatic Exchange of Information; this convention allows for automatic exchange of information, but only once states have agreed the administrative arrangements for this. There is still much work to do in this area.