In: Accounting
Briefly discuss whether the tax payable by the taxpayer is fair and equitable. In your discussion please indicate the general requirements for Common Reporting Standards (CRS), and the effect on International Competitiveness if a country’s tax rates are out of line with those in comparable countries.
The CRS is a new international standard for the automatic exchange of information on “Financial Accounts” (such as bank, mutual fund and brokerage accounts, segregated fund contracts and certain annuity and insurance contracts), between CRS participating countries, which includes Canada. The CRS is very similar to FATCA, except the exchange of Financial Account information under the CRS is between countries other than the US. It was developed by the Organization for Economic Co-operation and Development (OECD)2, with the support of Canada and the other G20 industrialized countries, to reduce tax evasion and improve tax compliance around the world.
One hundred countries3 have agreed to exchange information under the CRS and most of these countries have passed legislation implementing the CRS effective January 1, 2016 or 2017. The CRS requires financial institutions to request the tax residency of their clients and provide information to their local tax authority about any accounts held by tax residents of other countries. The local tax authority will then share the information with the tax authorities of the country or other countries where the taxpayer is considered to be a tax resident. The CRS describes the information to be exchanged, the different types of accounts and account holders covered, the types of financial institutions that are required to report, and procedures that financial institutions must follow to identify reportable accounts