Brisbane: The G20 leaders on Sunday committed to put in place a mechanism for automatic exchange of tax information between member countries by 2017, an issue which has been continuously raised by India at international fora to check the menace of black money.
The leaders of 20 developing and developed countries also endorsed the action plan to tackle Base Erosion and Profit Shifting (BEPS), which would be finalised in 2015, to make sure companies pay their fair share of tax.
Besides Prime Minister Narendra Modi, the G20 summit was attended by global leaders including US President Barack Obama and United Kingdom PM David Cameron and others.
"To prevent cross-border tax evasion, we endorse the global Common Reporting Standard for the automatic exchange of tax information (AEOI) on a reciprocal basis. We will begin to exchange information automatically with each other and with other countries by 2017 or end-2018," the communique released after the end of two day G20 summit said.
Later, briefing media, India's G20 Sherpa Suresh Prabhu said: "Prime Minister has significantly made a strong pitch for (checking) black money. India is doing its very best to get it (back). This is very necessary because tax havens create possibility of erosion of tax."
The G20 countries said they are taking steps to ensure fairness in the international tax system and to secure their revenue bases.
"Profits should be taxed where economic activities deriving the profits are performed and where value is created," the communique said, adding that the BEPS action plan will be finalised by 2015.
The BEPS initiative would ensure that tax is paid where profits are made.
The new framework of automatic exchange of tax information would mark a significant forward movement from the current practice of information exchange mostly on the basis of requests and only in the cases of suspected tax evasion or other financial crimes.
The standard, once implemented, would allow governments to obtain detailed account information from their financial institutions and exchange it automatically with other jurisdictions on an annual basis.
The G20 communique said: "We will work with them (developing countries) to build their tax administration capacity and implement AEOI. We welcome further collaboration by our tax authorities on cross-border compliance activities."
The new global standard on automatic exchange, as formulated by Paris-based Organisation for Economic Cooperation and Development (OECD), would be common for all countries.
It would facilitate a "systematic and periodic transmission of bulk taxpayer information by the source country of income to the country of residence of the taxpayer concerning various categories of income or asset information"
India has been at the forefront in raising the issues concerning tax avoidance and automatic exchange of information with a view to curbing tax evasion.
To enable automatic exchange of information on an annual basis, the financial institutions, including banks, brokers and fund houses, would have to mandatorily collect necessary details from their clients and submit them to their respective regulators.
The development assumes significance for India, as it has been facing difficulties in getting information on cases of suspected tax evasion from other countries, especially Switzerland, which has been maintaining that such details can't be shared without specific proof of financial irregularities by the concerned Indian client of Swiss banks.
However, the AEOI would also have a confidentiality clause and safeguards, while countries would need to pass domestic laws as per their respective legal jurisdictions to enable such a cooperation.