Effective September this year, Ghana will commence its second Automatic Exchange of Financial Account Information Standard (AEOI) for tax purposes with its partner countries.
According to the Ghana Revenue Authority (GRA), the 2019 AEOI exchanges were relatively successful. The country sent the financial account information to its partners, but they did not reciprocate in the process.
This is because Ghana had not passed the confidentiality and Information Security Management (ISM) test which could mandate the receiving country to respond. This is contained in a recent report released by the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Automatic Exchange of Information has been one of the two standardised components of Intergovernmental co-operation aiming at addressing cross-border tax evasion, which has become a major source of illicit financial flows. It is estimated that Africa loses around US$40 to US$80 billion every year in tax evasion.
This component requires financial institutions to report financial account information of non- residents to their tax authorities, who in turn automatically exchange this information with the tax authorities of the account holders’ country of residence under the globally-agreed Common Reporting Standard (CRS).
Such critical Information includes financial accounts held by banks, insurers and investment entities such as funds and certain trusts held by non-residents, including the identity and jurisdiction of the account holder.
The GRA indicated in the report that the country faced some challenges at every stage of implementation and had to postpone its first AEOI exchanges date from 2018 to 2019.
Compliance and monitoring strategy for financial institutions is being developed and implemented.
Currently, engagements are ongoing between the Authority and its exchange partners and financial institutions to streamline the processes and ensure the quality of information exchanged.
“GRA is in the process of becoming a data driven tax administration which means that AEOI will play an important role in our revenue generation efforts. In line with this, our domestic information gathering process is being modernized and streamlined to ensure that accurate domestic information is available for data matching”,
Nigeria is now set to join Ghana and the three other African countries that have already started – namely, Mauritius, Seychelles and South Africa – to comply with AEOI requirements from this year. Although the total number of countries complying with this international convention is said to be low, some analysts have insisted that the potential benefits of AEOI are huge.
The ultimate objective of tax transparency and information sharing is to assist tax administrations to fight against cross-border tax evasion and avoidance as well as increasing Domestic Resource Mobilisation.