Costa Rica has agreed to provide each year to the home country of foreigns who do business here details of financial transactions.
The agreement was brokered by the Organisation for Economic Co-operation and Development, which said now 41 countries have agreed to the automatic exchange.
Said the organization:
“Automatic exchange of information involves the systematic and periodic transmission of bulk taxpayer information by the source country to the residence country concerning various categories of income (e.g. dividends, interest, etc.). It can provide timely information on non-compliance where tax has been evaded either on an investment return or the underlying capital sum, even where tax administrations have had no previous indications of non-compliance.”
The exchange is supposed to begin either in 2017 or 2018. In addition to Costa Rica, the organization said that Australia, Canada, Chile, India, Indonesia and New Zealand also have agreed last week to the automatic exchange.
The details still are to be worked out, but initially the financial date of expats who are residents in Costa Rica do not appear to be the information that will be reported. The key word is country of residence. Data would come from banks.
Foreign firms that do business here would seem to be covered by the agreement.
The main purpose of the exchange is to catch tax cheats. Since only the United States among major nations taxes its citizens no matter where they live, the agreement seems to target those who are stashing money in countries other than where they reside.
The project received its first approval from major nations in 2013.
The organization is the entity that Costa Rica seeks to join so it can be considered a mature democracy, according to President Luis Guillermo Solís, who visited Ángel Gurría, secretary general of the organization, last week.
Said Gurría of the automatic transfers: “The world is quickly becoming a much smaller place, both for tax evaders and tax administrations. We expect a truly significant amount of additional financial information to circulate among authorities in the coming years, resulting in less tax evasion, greater tax revenues and a fairer tax system for honest taxpayers.”
The exchange agreement is structured so that it need not receive approval as a treaty, the organization said.