Roberto Gualtieri’s speech during the G20 High-level Symposium on International Taxation
First of all, I would like to thank the Saudi Arabia’s Ministry of Finance for organizing this Symposium and for the invitation to discuss the progress achieved in the field of tax transparency and the challenges ahead.
Let me highlight that tax transparency is key to ensure level playing field and fair competition among countries as well as fairness of the tax systems. In the past, bank secrecy and lack of transparency about foreign investors have facilitated international tax evasion, thus damaging the countries from which resources have been distracted, and generated alteration of investment choices and distortions of competition among jurisdictions.
Ten years after the establishment of the Global Forum on Transparency and Exchange of Information for Tax Purposes,progress on tax transparency are remarkable, with all the relevant jurisdictions and financial centres around the world having implemented the international standards on exchange of information for tax purposes.
Today, the international framework provides governments with efficient instruments to protect the integrity of their tax systems and fight against international tax evasion. This contributes to the objective of avoiding that honest taxpayers have to pay more than their fair share of taxes to ensure the financing of public services.
The implementation of the international standards on tax transparency has significantly improved the ability of tax administrations to collect unpaid taxes.
In particular, the Common Reporting Standard (CRS) on automatic exchange of financial information has ramped up international tax co-operation and it is undoubtedly a game changer in the fight against international tax evasion.
Just before the start of the automatic exchange of financial information, Italy has carried out a voluntary disclosure programme to enable non-compliant taxpayers to declare assets held abroad and related income. The imminent start of automatic exchange of information encouraged many taxpayers to disclose unreported assets generating tax revenues for about 5.3 billion euro.
Today, with the exchange mechanism in force, our tax administration can use the great amount of information available to improve the capacity to perform risk analysis and focus the audits on cases of higher risk of tax evasion. The first bunch of financial information received through automatic exchange has allowed for example the Italian tax administration to launch a compliance campaign relating to taxpayers with foreign assets. Following this initiative, 30% of the taxpayers filed a supplementary tax return with a relevant amount of taxes collected.
Moreover, from our experience is clear that the worldwide implementation of the international standards on tax transparency has reinforced trust and cooperation among tax administrations, paving the way for a more effective action to tackle international tax evasion.
Let me add that in the EU context the directive so called “DAC 5” (directive on administrative cooperation 5) that obliges Member States to allow tax authorities to access to information available for anti-money laundering purposes is a very effective instrument to tackle tax evasion schemes that use opaque legal entities to hide the real beneficial owners who try to avoid to pay taxes. In this respect, I see the benefits of exploiting the synergies in the application of tax transparency and money laundering standards and I would recommend further progress at international level in this area.
Equally, we expect that the directive so called “DAC 6” (directive on administrative cooperation 6), which obliges intermediaries to disclose to tax administrations tax evasion and avoidance schemes promoted or marketed to taxpayers, will function as strong deterrent to the dissemination of such schemes engineered by tax consultants and intermediaries also with the purpose of circumventing the CRS.
In the last decade progress in global tax transparency has been remarkable, but indeed there is still work to be done.
The existing international standards are proving to be effective in preventing and combating tax evasion but they are always subject to possible circumvention. It is unavoidable to continue to constantly monitor their functioning in practice, identify any possible weakness and evaluate the need for appropriate response. For example, in the area of automatic exchange of financial information, the circumvention has been pursued through the abuse of “Residence or Citizenship by Investment Schemes” and this has required adaptations to the international standard.
Also, it is necessary to have in place monitoring mechanisms to assess the effectiveness of the standards, such as robust peer review processes. The Global Forum is now working on a valuable framework that could ensure in practice that financial institutions correctly collect and report information to the tax authorities under the Common Reporting Standard. This exercise is crucial to ensure high quality of the information automatically exchanged in the mutual interest of the jurisdictions sending and receiving the data.
Further, while much has been achieved for automatic exchange of information on beneficial owners of financial assets, more can be done for non-financial assets (real estates, vessels, aircrafts, etc.), which are often hidden through entities used as opaque vehicles. From our perspective, it would be extremely useful to have in each jurisdiction electronic centralized registers collecting information about legal and beneficial owners of entities, with a view to ensure cross-border exchange of such information.
The rapid spreading of digital financial assets is another emerging issue. There is still uncertainty about their legal categorization and the tax treatment of the relevant transactions. Digital financial assets can facilitate avoidance of tax obligations because of the degree of anonymity provided by some of these payment instruments, also as a result of the difficulties faced by authorities to track transactions and identify the beneficial owners. This issue need to be addressed swiftly, before the use of virtual assets becomes widespread among taxpayers across the world and virtual assets start to be routinely used to hide wealth.
Another important issue is how to improve the effective use of data collected. Audits are the most common way of using the data and the key challenge in this context is the timely availability of good quality data. In this area it is crucial to continue to cooperate to exchange best practices and improve the data matching methodologies.
These are some of the challenges on tax transparency that, in my view, need to be addressed with continued cooperation. During our forthcoming G20 Presidency we will push for further progress in the area of tax transparency.