Last week the Israeli Finance Ministry announced its intention to join 51 other countries by signing the first ever multilateral tax transparency agreement. This is good news for those who wish to see Israel strengthen its alignment with the contemporary international standards of the liberal democratised world, based on the rule of law.
The Agreement on Automatic Exchange of Financial Account Information was initiated by the OECD and signed in Berlin last Wednesday. It ensures the automatic disclosure of information on foreign held financial assets between participating nations for tax purposes.
This mechanism has already existed within the EU since 2005. The major catalyst for the Agreement was the United States’ Foreign Account Tax Compliance Act (FATCA) which requires non-US institutions to provide US tax authorities with data on US account holders. Earlier this year Israel agreed to implement FATCA through a bilateral treaty, whereby Israeli financial institutions will supply information on US account holders with assets in Israel to the US Internal Revenue Service (via the Israeli Tax Authority).
“Let’s make a joint contribution to more transparency and fairness in our globalised 21st century” – Wolfgang Schaeuble, Finance Minister of Germany.
The agreement ensures respect for the rule of law, by impeding would-be tax evaders from avoiding tax in their home states through non-disclosure of foreign financial assets in participating countries. If the agreement succeeds, it will also show how international cooperation can ensure the compliance with national law by action at the international level.
Israel’s planned participation, which follows its admission as a full OECD member, will help ensure its financial regime and banking sectors remain aligned to Western standards of governance and accountability.