Automatic exchange of tax information: initiation, implementation and guidelines in Bulgarian context

Atanaska Filipova-Slancheva

doi:10.21511/ppm.15(si).2017.04

Abstract

The paper aims to introduce and clarify automatic exchange of tax information as a global and European Union initiative in order to curb tax evasion via cross-border tax avoidance, along with aggressive tax competition. It investigates the role of Organization for Economic Cooperation and Development (OECD) which developed Common Reporting Standard (CRS) and endorsed it in 2014. CRS is a framework for automatic exchange of tax information with the purpose to promote cooperation among various jurisdictions. For EU Member States, CRS is transposed by the amended EU Directive on Administrative Cooperation (DAC2). Bulgaria as a member state has transposed the Directive in the national law. This study examined automatic exchange of tax information (AETI) from Bulgarian perspective – historic development, legal framework, responsible and competent authorities and application of DAC2 and expectations for newly approved DAC3. In the study, Bulgarian financial institutions (banks) are examined, implementation status and how the challenge of AETI, including client information and data protection, are addressed. Primary data for banks are collected from publicly available sources (website of the respective bank), as company websites of top 5 Bulgarian banks were examined for information related to automatic exchange of financial information/tax information. Results show that major Bulgarian banks, within First Group in terms of assets, are initiating the process, internal due diligence and preparation for the new reporting requirements. General conclusion is that currently there are some critical issues to be addressed, new DAC3 might introduce higher challenges, as practical guidance is the solution.

Highlights

As an aftermath of the financial crisis of 2007–2008 and in the environment of budget deficits and eroding budget revenues, authorities have initiated a global approach for addressing tax avoidance
This study examined automatic exchange of tax information (AETI) from Bulgarian perspective – historic development, legal framework, responsible and competent authorities and application of DAC2 and expectations for newly approved DAC3
In February 2014, the G20 Finance Ministers and Central Bank Governors endorsed the global standard for automatic exchange of tax information, which is a major shift in international taxation

Summary

INTRODUCTION

As an aftermath of the financial crisis of 2007–2008 and in the environment of budget deficits and eroding budget revenues, authorities have initiated a global approach for addressing tax avoidance. Respect of due diligence and reporting systems EU (DAC2) which had extended the cooperation (KPMG, 2015) Both treaties introduce a great between tax authorities to the automatic exchange number of specific definitions, which are used of information on financial accounts. EU member states are considering changes of information for tax purposes – Convention to the Administrative Cooperation Directive, on Mutual Administrative Assistance in Tax which provides for reporting that is similar to Matters, the Multilateral Agreement between the CRS. DAC3 builds upon DAC2 by including the Competent Authorities on the Automatic information exchange on tax rulings At this Exchange of Financial Account Information point it is unclear whether reporting under and the Global Forum on Transparency and the Administrative Cooperation Directive will Exchange of Information. Signed on December 5, 2014 in Sofia, ratified with an act (SG, issue 47 of 2015)

Bulgarian banks in light

RESULTS

CONCLUSION

20. Organisation for Economic Co-Operation and Development 2012