The OECD is working on a project that is called ‘Tax Co-operation for the 21st Century‘ and is regularly reporting to the G7 Finance Ministers and Central Bank Governors on the progress.

The reports show that international governments, led by the U.S., want to make the most of digital opportunities. This latest report has a focus on the global minimum tax for businesses (‘GloBE Model Rules’), but also shows where taxation of ordinary citizens (‘taxation of individuals’) goes.

Real-time information through technology-based solutions
Already in the report published in 2022 it was observed that there is an increasing trend towards tax administration being based on real-time information [1]. The 2023-report refers to technology-based solutions for effectively collecting and using information for personal income tax purposes [2].
Chapter 2 of the latest report, ‘Beyond corporate tax‘, shows that in future organisations will provide governments with real-time information that allows the tax authority to prepare the draft tax returns, ‘third-party reporting’. Third-party reporting in the Netherlands already happens, by collecting information from banks, employers and other third parties, ‘renseignering’ [3].

See on real-time information e.g. paragraph 31.:

Chapter 2 of that Report looked at recent developments in relation to the exchange of information with respect to individuals. It also described the emerging trends, evolving from periodic, bulk, backward-looking access to information towards more targeted, direct, and real-time access to data.

The chapter refers to the Crypto-Asset Reporting Framework (CARF). In Europe based on this framework all cryptocurrency transactions will be real-time recorded in a European database [4]. It shows where it is going.

Large-scale exchange of beneficial ownership data
Though there are many ‘beneficial owners’ (BO’s) without any economic interest in their entity, the international legislator assumes that information about the BO is always relevant:

2.2.3. Beneficial ownership
36. While these developments will ensure that the tax transparency architecture for financial assets remains effective and fit for purpose, work has also started on possible approaches for enhancing tax transparency with respect to income held through non-financial assets, in particular real estate. In this connection, the report delivered by the OECD to the G20 Finance Ministers in July 2023 sets out possible structural solutions that step away from annual exchange of information between tax authorities and build on the trend of digitalising ownership registers to move to a model whereby tax authorities proceed with the real-time or fast sharing of information in data repositories, including real estate registers and beneficial owner registers of legal entities and legal arrangements.
37. In this respect, work is now advancing to collect information from jurisdictions on their current practices related to the collection and exchange of information on foreign-held real estate, which will be used to design a roadmap on how enhanced transparency on foreign-held real estate can be delivered by interested jurisdictions on an incremental basis. The combination of greater visibility on ownership of, and income derived from real estate, together with the advances in exchange on financial accounts and cryptoassets, provides opportunities for more effective and efficient taxation of income, as more information will be directly available to tax administrations, rather than pursuing an after-the-fact, time consuming audit or investigation in many cases.

The transparent individual
When this type of publication talks about ‘transparency’, such as ‘tax transparency’, it is about providing the best possible information to the government. It applies to everyone who has been given the qualification BO and to all other individuals. In fact, this means that every individual becomes transparent to the government with everything he or she does every second of the day.

In the future, real-time information flows will keep the government informed:

2.2.4. Real time information flows
38. The Forum on Tax Administration has also recognised the value of moving towards more real-time models of information flows. The integrated data vision explored in the OECD Forum on Tax Administration
3.0 report (OECD, 2020) is that by designing the data collection, reporting and exchange elements into the processes of taxpayers and businesses, with the data moving automatically through machine-to-machine based processes, including potentially in real-time, tax compliance can increasingly be designed in. Taking this forward, in October 2023, the FTA Plenary in Singapore approved a series of collaborative projects between tax administration and stakeholders from the business and academic communities to help progress the Tax Administration 3.0 vision. Two of these projects focus on the practical considerations raised by making data exchange between tax administrations or between tax administrations and business more automated and closer to taxable events. Two further projects are considering the strategic issues raised by digital transformation and how Artificial Intelligence can be used ethically by tax administrations.

Extra information sources
Currently international governments have realised large scale exchange of information on bank accounts (FATCA, CRS), accompanied by large scale exchange of information on individuals (account holders, BO’s [5]). In future new information sources will be added, like information on real estate [6] and on ownership of art objects [7].

Fundamental rights
What is striking about the report is that while fundamental rights are talked about, there is little to show in terms of protecting citizens from an overly greedy government [8]. An example of this is the US expecting everyone with US citizenship to declare world income in the US, even if the person lives outside the US and is already required to declare world income in the country of residence.

More information:

OECD Reports on Tax Co-operation for the 21st Century for the G7 Finance Ministers and Central Bank Governors:

• 2024 Progress Report on Tax Co-operation for the 21st Century, 24 May 2024, announcement, report.
• 2023 Progress Report on Tax Co-operation for the 21st Century, 11 May 2023, announcement, report.
• Tax Co-operation for the 21st Century, 20 May 2022, announcement, report.

Notes:

[1] Executive summary of the latest report: “The Tax Co-operation Report made a number of observations on the increasing trend towards tax administration being based on realtime information and compliance by design principles“.

[2] Executive summary of the latest report: “It also showed how the principles of the Tax Co-operation Report beyond corporate income tax were being translated into action, such as with technology-based solutions for effectively collecting and using information for personal income tax purposes.”

[3] Read the articles on this blog on ‘renseignering’.

[4] Read my article on the Dutch consultation of implementation legislation.

[5] Regulations on large-scale exchange of BO data are already partly functioning and will be further perfected.

[6] In paragraph 2.3. as potential areas of consideration for the future are mentioned: “Support the work to explore enhanced transparency on real estate and beneficial ownership.”

[7] Art and other assets are not mentioned in the latest report but are discussed in other OECD publications. Europe is already considering the mapping of every individual’s property through a central asset register, read the article of August 2021 and the article of September 2022.

[8] Pasquale Pistone, Ivan Lazarov, Alessandro Turina (IBFD) in their article Automatic Exchange of Information and the Protection of Taxpayers’ Rights. Towards a New Multilateral MultiTiered Architecture suggest that there should be more attention to protecting the taxpayer.