By Richie Kock, Esq.
On January 1, 2018, Panama joined the list of countries that committed to the Automatic Exchange of Information (AEOI), or otherwise known as the Common Reporting System (CRS), as proposed by the G20 countries and accepted and propelled by the Organisation for Economic Co-operation and Development (OECD). Other well-known tax havens such as the Netherlands and the British Virgin Islands (BVI) already committed to the CRS and are included in the list.
The CRS is extracted from the Foreign Account Tax Compliance Act (FATCA). The FATCA constitutes bilateral (intergovernmental) agreements between the US and other countries in an effort to collect US taxes on assets held by US citizens in other jurisdictions. The financial institutions in other jurisdictions are required to report on assets held by their US clients.
In the same way, the CRS intents to combat base erosion and profit shifting (tax avoidance) and illegal tax evasion through a system of automatic exchange of information by the financial institutions vested in the participating countries.
Financial institutions also include banks. The requirement of banks to disclose information effectively eliminates bank secrecy.