The topic

• Global financial markets have created numerous possibilities for tax evasion.
• Automatic information exchange systems have been created to tackle this issue.
• Two major frameworks:
  • FATCA
    • A U.S Legislative act with extraterritorial effects
    • Financial institutions are forced to comply under a threat of a 30% withholding  tax
    • 113 signatory jurisdictions
  • CRS
    • A system modeled after FATCA
    • Based on voluntary participation
    • Created by the OECD
    • 100 signatory jurisdictions

Research Questions and Methodology

• What are the most significant differences between CRS and FATCA?

• What are the practical consequences of the adoption of CRS and FATCA?

• Analysis of treaties and academic writings
• Legal dogmatic approach
• Division of both sets of rules to similar sections for the purpose of comparison
  • The underlying treaty
  • Key definitions
  • Due diligence procedures
  • Issues and effects

Findings

• Reportable accounts

  • ​CRS affects a broader range of accounts

• Compliance incentives

  • FATCA creates a greater incentive to comply with a threat of a punitive withholding tax in a case of non-compliance

• Controlling persons of entities
  • CRS has better mechanisms for finding the true owners and beneficiaries of assets
• Reportable entities
  • More entities are reportable under CRS
• Overall, CRS appears to be more effective and broader in its scope, at least on paper
  • The broader scope of CRS is also likely to create greater implementation costs for financial institutions and tax authorities
• ​Reciprocity
  • In principle, all states exchange information reciprocally under CRS
  • U.S has promised to reciprocate in information exchange in the future FATCA
    • No deadline
    • The U.S shares little tax account information automatically with other countries
    • The U.S becoming a major tax haven?

Limitations and future research

• No comprehensive statistics on the effects of either system

  • These statistics should be analysed once they are available

• Legal dogmatic approach

  • The full effects of international relations and politics and fall outside the scope of my research

    • Though opinions of experts in these areas are included in my thesis, the willingness of states to participate in these systems should be analysed more comprehensively in the future. 

Thank You!

Sampo Järvinen