Data exchange to fight tax evasion
Authorities signed many global treaties
Starting this month, the exchange of financial information should help combat transnational tax evasion, says director-general of the Revenue Department Lavaron Sangsnit.
In 2017, Thailand joined the Global Forum on Transparency and Exchange of Information for Tax Purposes as the 139th member state to the Convention on Mutual Administrative Assistance in Tax Matters (MAAC), a multilateral treaty developed by the Organisation for Economic Co-operation and Development (OECD). As of March 2023, 168 countries were signatories.
Under this cooperation framework, the Revenue Department needs to adhere to a high standard of international cooperation for tax matters. The forum aims to promote international cooperation and the exchange of tax information between countries to allow tax authorities to effectively use the data.
The MAAC is wide in scope and covers a number of types of information exchanges. The first is a requested information exchange, such as the information of taxpayers, either individuals or juristic persons, as requested by the other parties.
The second is a spontaneous exchange of information, unsolicited by other parties as this is meant to promote better tax collection.
The final method is automatic unsolicited exchange of information, done annually based on an international agreement.
The Revenue Department is in the process of preparing procedures and systems related to the automatic exchange of information, which include three data sets.
‘‘ The exchange of financial information can be used for efficient tax administration, including transparency, fairness and prevention of transnational tax evasion, enhancing Thailand’s investment competitiveness. REVENUE DEPARTMENT
The department requires multinational companies that meet certain conditions to submit a Country-by-Country Report for the accounting year 2021, starting from Jan 1, 2022, with aggregate data on their global allocation of income, taxes paid, and economic activity among tax jurisdictions in which they operate. The goal is to improve transfer pricing documentation and provide tax administrations with information to conduct high-level transfer pricing risk assessment.
This information exchange falls under the Multilateral Competent Authority International Agreement on the Exchange of Country Reports, which Thailand signed on Dec 9, 2022.
There are 96 parties to the agreement and Thailand expects to begin exchanging country reports this month. Companies headquartered in Thailand can file a country report here.
Thailand should receive country reports from the country of residence of multinational corporations as well as for its related operations in Thailand. The information can be used for efficient tax administration, promoting tax transparency, fairness and prevention of transnational tax evasion, enhancing Thailand’s international competitiveness for investment, said the department.
The OECD’s common reporting standard (CRS) calls on the department to obtain information about multinational corporations from their financial institutions, such as banks, securities depository centres, asset management companies and life insurance companies, and automatically exchange that information with tax authorities of other jurisdictions to promote tax transparency. Thailand intends to begin CRS exchange in September 2023.
This information exchange falls under a separate international agreement that Thailand signed on March 28, 2022. There are 120 parties to the agreement, including Asean members Brunei, Malaysia, Singapore and Indonesia.
Thailand enacted a royal decree on information exchange on March 31, 2023 to implement a global standard and improve transparency, according to the CRS requirements.
Mr Lavaron said the department is in the process of bringing the signed MAAC agreement to parliament for ratification. Once ratified, Thailand will need to implement the required international standards and procedures for information collection and automatic exchange.
Signatories to the MAAC agreement have shown positive results in terms of increased tax collection and voluntary declaration of assets held overseas, according to the OECD.
The Foreign Account Tax Compliance Act (FATCA) is similar to OECD standards for financial account information exchange, but applies only to US interests.
After a subordinate law is approved that explains in detail the information exchange under FATCA, the Revenue Department is expected to sign an agreement with the US Internal Revenue Service that outlines the conditions for the exchange of financial account information of US citizens who reside in Thailand.