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Could you please explain the reporting requirements across local jurisdictions?

Reporting at its most simplistic level is to extrapolate data, confident in the fact that the due diligence checks in place have clearly categorised reportable versus non-reportable accounts. You also need to be confident that your reporting rules engine can pull reportable account data to send in the manner outlined by the recipient. The real question to ask here is "what are the pitfalls to look out for"? The OECD have made it clear that the CRS schema is a transmission mechanism for information exchange between governments. This does not mean your local governments, tax authority, will accept data in a common fashion. If you have a global footprint, your system will need to be agile enough to cope with various submission methods and timelines, and possibly even overlaying existing reporting (for example domestic tax reporting) with that of the CRS.

Can source countries cope with large volumes in short time frames?

Tax authorities don’t have a good track record when it comes to IT projects, building systems, taking data in, rationalising it, and turning it into something meaningful. This will be challenging for governments. How will they collect the data from their financial institutions? This will be particularly challenging for countries that currently don’t require tax reporting. How will the data be filtered? I don’t think the OECDs schema will be doing this. Finally the detail behind CRS and of course FATCA presents some very real and challenging issues. The  common reporting standard was designed to be exactly that, a standard, and we are and we continue to see many differences in how the CRS is being implemented across the globe, leading to some real fragmentation. We are now live with CRS and we all had very little time to prepare. “Fast is fine, but accuracy is everything”. The success of the CRS for each government relies on the accuracy of information it receives from other governments and of course their financial institutions. With little time for all to prepare, it’s likely that large amounts of data will be exchanged because it won’t have been effectively scrubbed. This will make the problem worse for source countries. Capacity building is a problem. We are seeing governments already issuing announcements that they are extending filing deadlines and closing portals to be re-opened at a later stage. Even though we can guess, we are not explained why this is happening. Therefore I think that the answer to the question is no.                                                                                           

Could you please discuss the danger of over-reporting?

It has always been stated that the legacy of FATCA and CRS would have an impact on the client, and this is brought into sharp focus if you are over-reporting. Quite simply if you over report, it’s possible that a tax authority will launch an unwarranted investigation on the customer because the financial institution failed to complete checks and remediate its clients records. The result could be that a client that is otherwise legitimately complying with its domestic tax obligations is subject to a tax audit. There is also the likelihood that reporting vast amounts of data to your tax authorities, signals a lack of control and due process within your organisation. Compliance with CRS requires you to identify and report reportable clients and therefore, over- reporting could be a sign that you aren’t doing that. In an environment where penalty and audit regimes for CRS are still under consideration it would be unwise to take an ‘over-reporting’ approach.

What would you like to achieve by attending the 3rd Edition Automatic Exchange of Information: The Practicalities of Reporting under CRS?

 This is an opportunity to discuss the ‘what next’ scenario. It is clear that governments will not stop at the CRS. It is clear that governments don’t think enough is being done and the recent Panama papers leaks appear to be mobilising further action with new proposals on Beneficial ownership registers and reporting, so we may have already fast forwarded to CRS 3. We are seeing the European Commission ‘EU’ work such as the 4th Anti Money laundering directive but before that even begins DAC5 proposals are being discussed. The EU has already mooted that more is needed to step up the information exchange architecture to allow more real time analysis of tax evasion risks. In the UK we have the corporate criminal liability offence for the facilitation of tax evasion; the EU is planning to introduce mandatory disclosure rules (MDRS) on intermediaries (Bank advisors and other service providers). Consistent with the proposals in BEPS 12, a minimum standard would require disclosure of:
(1)schemes designed to circumvent the CRS
(2)passive offshore tax avoidance and evasion schemes – such as those used in the Panama papers. Following a so–called ‘hallmarks’ approach.
The intention here would be for the intermediary to disclose these schemes to the local tax authority which would subsequently exchange with other tax administrations.
Again the intention of governments is for the proposals to move quickly to disrupt the ‘supply-side’. How much more agile do we need our technology to be?