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THE STATE OF THE EUROPEAN UNION
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between competent authorities which regulates
how these should apply the automatic exchange
of annual information.
The introduction of the CRS over recent
years has required the EU to review its legisla-
tion in this area to comply with the reporting
levels established by the OECD. While it is true
that the EU was the first region to implement a
system for the automatic exchange of tax infor-
mation, the first AEOI Directives
2
contained a
series of loopholes which undermined their ef-
fectiveness. In particular, AEOI was limited to
certain kinds of income, only affected the cur-
rent accounts of individuals, and permitted
some Member States
3
to preserve transitional
regimes which were less demanding than the
general system established for other countries.
The requirement for unanimous agreement
when revising these directives meant that these
loopholes were not closed. It was only with the
appearance of the Foreign Account Tax
Compliance Act (FATCA) in the United States
and, subsequently, approval of the CRS by the
OECD that the most reluctant Member States
gave in to international pressure and agreed to
move towards more comprehensive AEOI.
Indeed, the Directive on Administrative
Cooperation in the Field of Taxation, subse-
quently converted into the reference standard
on the automatic exchange of tax information
in the EU, had to be revised to bring it into line
with the requirements of the CRS and to include
the main types of income within its scope. New
categories – such as dividends, current account
balances and some insurance products – were
covered by the AEOI obligation.
2
Directive 2003/48/CE, on Taxation of Savings Income and
Directive 2011/16/EU, on Administrative Cooperation in the
Field of Taxation.
3
Luxembourg, Austria and, initially, Belgium.
Monitoring compliance with automatic
exchange of information (AEOI)
Now that the majority of countries have agreed
to apply the CRS and the Directive on Admi-
nistrative Cooperation transposed into law by
Member States, what is needed is evaluation and
monitoring to identify the degree to which these
reforms are actually being implemented by indi-
vidual countries.
In contrast with the global regulations of the
OECD, the EU Directive on Administrative
Cooperation, like any other directive, is binding
on Member States and is backed by a coherent
system of coercive measures, with the Court of
Justice of the European Union guaranteeing
compliance.
The process of applying and monitoring the
OECD standard, by contrast, is far more diffi-
cult. To start with, applying the CRS involves
several different legal instruments. The first step
is for jurisdictions to adhere to the OECD and
Council of Europe Convention on Mutual
Administrative Assistance in Tax Matters. Next,
the members of this Convention must sign the
Multilateral Competent Authority Agreement
(MCAA),
4
which gives effect to the Convention
and provides a legal platform so that jurisdic-
tions may exchange information.
However, although the application of the
CRS involves all of these multilateral conven-
tions and agreements, it is also the case that
activating AEOI in each specific case requires a
bilateral agreement between the jurisdictions
involved (the jurisdiction of residence and the
one where the bank account is based).
4
The MCAA was signed during the annual meeting of the
Global Tax Forum on 29 October 2014 in Berlin.