Automatic Exchange of Information

AuthorDavid Kerzner, David W. Chodikoff
chapter eight
This chapter provides important background to automatic exchange of in-
formation (Automatic Exchange) and examines key policy considerations
regarding the new standard. As the OECD rules and guidance on Automatic
Exchange run in the hundreds of pages, dealing with the subject at length is
beyond the scope of this chapter. Instead, this chapter provides an overview of
the framework for Automatic Exchange, which will not only be of importance
to f‌inancial institutions, funds, and f‌inancial service providers but will also
be of immense importance to lawyers, accountants, and f‌inancial planners
in advising their private clients. Due to the broad scope of the rules af‌fecting
trusts, professionals advising private clients will want to understand the im-
plications of the rules for their clients’ trust structures as soon as possible.
Article 26 of the OECD Model Tax Convention on Income and on Capital1
provides for three main forms of information exchange: upon request, auto-
matic (or routine), and spontaneous. Automatic Exchange typically involves
the systematic and periodic transmission of bulk taxpayer information from
the source state to the residence state.2 This information exchange generally
concerns details of certain categories of income (e.g., interest, dividends,
1 OECD, Committee on Fiscal Af‌fairs, Model Tax Convention on Income and on Capital, (Paris:
OECD, 1992) (loose-leaf) at Art 26 [convention and commentary together: Model Tax Treaty].
2 See OECD, Manual on the Implementation of Exchange of Information Provisions for Tax Purpos-
es (Paris: OECD, 2006) at 3, online:
pdf [Manual on Implementation]; OECD, Automatic Exchange of Information: What It Is, How
It Works, Benef‌its, What Remains to Be Done (Paris: OECD, 2012) at 7, online:
248 InternatIonal tax evasIon In the Global InformatIon aGe
royalties, salaries, and pensions) arising in the source state and involving
many individual cases.3 The OECD describes Automatic Exchange as a pro-
cess comprising the following seven steps:4
1) Payor or paying agent collects information from the taxpayer or self-gen-
erates it.
2) Payor or paying agent reports information to the tax authorities.
3) Tax authorities consolidate information by country of residence.
4) Information is encrypted, bundled, and sent to the tax authorities in the
residence country.
5) Information is received and decrypted.
6) Residence country begins a matching process on the information received.
7) Residence country analyzes the results and takes appropriate compli-
ance action.
In 2013, the G20 announced its commitment to seeing Automatic Ex-
change become the new global standard by the end of 2015.5 In 2014, the G20
f‌inance ministers endorsed the Common Reporting Standard for automatic
exchange of tax information (CRS).6 Just a few years earlier, in 2010, the
OECD had recognized information exchange upon request as the universal
standard.7 The exchange upon request standard was largely implemented
through the signing of hundreds of tax information exchange agreements
ctp/exchange-of-tax-information/automatic-exchange-of-information-report.pdf [Automatic
Exchange of Information].
3 See Manual on Implementation, above note 2 at 3.
4 Automatic Exchange of Information, above note 2 at 9. In a survey conducted by the OECD (in
which both Canada and the United States participated), all thirty-eight countries noted that
they received information automatically from treaty partners, and thirty-three (87 percent)
of them said that they sent information automatically to treaty partners (Denmark sent
information automatically to seventy countries) (see ibid at 15). Five countries each reported
receiving records relating to more than EUR 15 billion in a particular year, while most coun-
tries reported exchanging information relating to billions of euros (see ibid at 17).
5 See G20, Communiqué, “G20 Meeting of Finance Ministers and Central Bank Governors”
(20 July 2013), online:‌inance.html; Editorial, “The
Group of 20 Tackles Tax Avoidance” New York Times (6 September 2013) A22, online: http:// [NY Times Editorial, “G20 Tackles Tax Avoidance”].
6 See OECD, Standard for Automatic Exchange of Financial Account Information in Tax Matters
(Paris: OECD, 2014) at 10, online: [Standard for
Automatic Exchange]; OECD, “Common Reporting Standard” & “Commentaries on the Com-
mon Reporting Standard” in OECD, Standard for Automatic Exchange, ibid, 29 (standard) and
93 (commentaries) [standard and commentaries together: CRS].
7 See OECD, Promoting Transparency and Exchange of Information for Tax Purposes (Paris: OECD,
2010) at 2, online:

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