EXPLAINED: How Automatic Exchange of Information Framework can prevent crypto tax evasion

Nirmala Sitharaman urged G20 nations to bring cryptocurrencies under ‘Automatic Exchange of Information framework’ at the G20 Ministerial Symposium on Tax and Development in Bali, Indonesia and this has intrigued interest around what the Automatic Exchange of Information framework is and how it prevents tax evasion.

What is Automatic Exchange of Information Framework?

The Automatic Exchange of Information (AEOI) is a framework developed to curb the evasion of taxes globally. The Common Reporting Standard (CRS), which was mentioned by the Finance Minister at the tax summit,  is an information standard for the AEOI. The Common Reporting Standard was developed in response to a G20 request and approved by the Organisation for Economic Co-operation and Development (OECD) Council in July 2014.

Finance Minister Nirmala Sitharaman's argument for AEIF

Several leaders, including Finance Minister Nirmala Sitharaman have stressed that the Automatic Exchange of Information framework has ushered progress when it comes to tax transparency.

Tax evaders often explore non-regulated assets like cryptos to evade taxes. And by bringing cryptocurrencies under the purview of Automatic Exchange of Information framework, tax evaders would not have this option.

Sitharaman explained this at the G20 Ministerial Symposium on Tax and Development in Bali, Indonesia by saying, “Our investigations have shown that numerous layers of entities are often set up by tax evaders to conceal their unaccounted assets. Tax evaders explore other avenues to shift their unaccounted wealth through investment in non-financial assets.”

She further added, “While the development of the crypto asset reporting framework is underway, I call upon the G20 to examine the feasibility of an Automatic Exchange of Information in respect of other non-financial assets beyond those covered under the CRS like immovable properties as well.”

Sitharaman highlighted that over 100 nations have adopted the Common Reporting System. She said, “Over 100 countries have committed to exchanging financial account information under the Common Reporting Standards.”

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