Recently, the "International Standard for Automatic Exchange of Tax Information on Cryptographic Assets Reporting Framework and the 2023 Revised Common Reporting Standard" released by the OECD Forum on Tax Transparency and Information Exchange (Global Forum) was selected as one of the ten major tax events in the world.
Source: China Taxation News
Editor: TaxDAO
Recently, the 2023 China's Top Ten Tax News and the World's Top Ten Tax Events conference, jointly organized by the China International Taxation Research Association, China Taxation News, and China Taxation Magazine, was held in Beijing. Among them, the OECD released the "International Standard for Automatic Exchange of Tax Information on Cryptographic Assets Reporting Framework and the 2023 Revised Common Reporting Standard," which was selected as one of the world's top ten tax events.
It is reported that on June 8, 2023, the OECD Forum on Tax Transparency and Information Exchange (Global Forum) released the "International Standard for Automatic Exchange of Tax Information on Cryptographic Assets Reporting Framework and the 2023 Revised Common Reporting Standard," including the "Cryptographic Assets Reporting Framework" (CARF), the "2023 Revised Common Reporting Standard" (CRS), related comments, and information exchange frameworks, which together constitute the international standard for automatic exchange of tax information. The "Cryptographic Assets Reporting Framework" specifies the automatic exchange of tax information on cryptographic assets, and the "2023 Revised Common Reporting Standard" includes certain electronic currency products and central bank digital currencies within its scope. According to a press release issued by the OECD on November 10, 2023, 48 countries and regions plan to implement the "Cryptographic Assets Reporting Framework" by 2027.
Although China is not within the scope of CARF, China's attention to CARF reflects the country's concern for international tax transparency, conveying China's potential concern for industry development and its emphasis on international tax cooperation. Firstly, the anonymity and borderless nature of cryptographic assets indeed pose significant challenges to the global tax system. This emerging form of digital assets, especially its liquidity and untraceable characteristics on a global scale, presents new requirements for preventing base erosion and profit shifting (BEPS) issues. China's attention to CARF to some extent stems from an awareness of this trend and seeks to address this issue through international cooperation and information sharing. In addition, the rapid development in the field of cryptographic assets presents new challenges to domestic tax policies and regulatory frameworks, which may require adjustments to current tax policies, possibly even the formulation of new regulations while absorbing and drawing lessons from CARF. Finally, China's attention to CARF also indicates its willingness to strengthen international tax cooperation. In the context of global economic integration, individual countries find it difficult to independently address the tax challenges posed by cryptographic assets. Therefore, cooperation with other countries and international organizations (especially in information exchange and tax policy coordination) will play a crucial role in addressing tax challenges.
The list of countries participating in CARF exceeds the 38 member countries of the OECD, including offshore financial havens such as the Cayman Islands and Gibraltar. However, the absence of major markets such as China, Russia, India, the United Arab Emirates, and Turkey, as well as the non-participation of almost all countries in Africa, weakens CARF's global impact. The differences in the attitudes of participating countries further complicate the situation, with traditional financial powers such as the United Kingdom highly praising CARF, believing it contributes to the legitimacy of international regulation, while the attitudes of third world countries towards CARF are mixed. The implementation of CARF demonstrates the government's intention to obtain information and expand control over the movement of cryptographic assets.
CARF requires the reporting of cryptocurrency transactions, a measure that has far-reaching implications for exchanges and traders. Centralized exchanges may be affected, while their reporting of cryptocurrency transactions will become tax information for various countries, affecting end cryptocurrency traders. CARF represents international efforts to standardize cryptocurrency taxation, but it is not the only agreement. Meanwhile, the EU's DAC8 also supplements CARF, emphasizing anti-money laundering measures, which are more applicable to central bank digital currency (CBDC) transactions.
The convergence of CARF and DAC8 reflects the global commitment to regulating cryptocurrency taxation. The implementation of these frameworks in domestic law requires joint efforts from all member countries. In the process of addressing the complexity of the global financial system, these frameworks have become key tools for promoting tax transparency in the cryptocurrency field. The implementation of CARF will enhance tax transparency and compliance in the cryptographic asset industry, strengthen market stability, and enhance investor trust in the market. For future cryptographic asset traders, it is important to understand and comply with CARF requirements and the tax rules in their jurisdiction to avoid unnecessary risks and fines, while also paying attention to market dynamics and opportunities and planning and managing cryptographic asset investments rationally.
For more information on CARF, you can refer to TaxDAO's previous special analyses "CARF: A New Era of Global Cryptographic Asset Tax Regulation" and "48 Countries Commit to Implement CARF: Attitudes and Future Framework for Cryptographic Tax Transparency."
Below is the full text of the "Ten Major Tax Events" in 2023.
1. The Third Belt and Road International Cooperation Summit Forum was successfully held and emphasized the construction of a multilateral cooperation platform in areas such as taxation
On October 18, 2023, the Third Belt and Road International Cooperation Summit Forum was successfully held in Beijing under the theme "Building 'Belt and Road' with High Quality, Hand in Hand to Achieve Common Development and Prosperity." Chinese President Xi Jinping attended the opening ceremony of the forum and delivered a keynote speech titled "Building an Open, Inclusive, Interconnected, and Commonly Developed World," announcing China's support for eight actions to build "Belt and Road" with high quality, including China's support for the strengthening of multilateral cooperation platforms in areas such as energy, taxation, and finance with countries participating in the construction of "Belt and Road," clarifying a new direction, opening up a new vision, and injecting new impetus into the construction of "Belt and Road." Over the past 10 years, more than 150 countries and over 30 international organizations have signed relevant cooperation documents for the Belt and Road Initiative, with a large number of projects taking root, opening up a path to common development, opportunities, and prosperity, making it the most popular international public product and the largest-scale international cooperation platform in the world today.
2. The Fourth Belt and Road Tax Administration Cooperation Forum reached and released six achievements
From September 11 to 13, 2023, the Fourth Belt and Road Tax Administration Cooperation Forum was held in Georgia, with more than 300 people, including heads of tax departments from 32 countries and regions, 10 international organizations, and representatives of some multinational enterprises, conducting in-depth discussions on topics such as optimizing the tax business environment, reaching and releasing the "Joint Statement of the Fourth Belt and Road Tax Administration Cooperation Forum" and the "Action Plan for Optimizing the Tax Business Environment (2023-2025)," and five other achievements. Over the past 10 years, the Chinese tax authorities have continuously assisted in building the Belt and Road through tax services, advocated the establishment of a Belt and Road tax administration cooperation mechanism, and have held four Belt and Road tax administration cooperation forums, providing a practical and effective platform for communication and exchange for relevant parties.
3. The United Nations General Assembly adopted the resolution "Promoting Inclusive and Effective International Tax Cooperation at the United Nations"
On November 22, 2023, the 78th session of the United Nations General Assembly's Economic and Financial Committee (Second Committee) voted to adopt the resolution "Promoting Inclusive and Effective International Tax Cooperation at the United Nations," proposed by the African Group represented by Nigeria, with 125 votes in favor, 48 votes against, and 9 abstentions. On December 22, the United Nations General Assembly adopted the resolution with 111 votes in favor, 46 votes against, and 10 abstentions. The resolution decides to develop a United Nations international tax cooperation framework convention to strengthen international tax cooperation and make it more inclusive and effective. The resolution also decides to establish a special intergovernmental committee with unlimited membership, led by member states, to draft the scope of authority of the United Nations international tax cooperation framework convention and requests the special intergovernmental committee to submit a report on relevant issues to the 79th session of the United Nations General Assembly.
4. The Organization for Economic Cooperation and Development (OECD) released the "Statement on the Outcomes of the Two-Pillar Solution to Address the Tax Challenges of the Digital Economy"
On July 11, 2023, the 138 members of the OECD/G20 Inclusive Framework (IF) on Base Erosion and Profit Shifting (BEPS) reached the "Statement on the Outcomes of the Two-Pillar Solution to Address the Tax Challenges of the Digital Economy." The statement includes a summary of the series of outcomes formed for the design of the two-pillar solution, unresolved issues, follow-up work plans, and commitments to defer the implementation of digital service taxes. Subsequently, the OECD successively released a series of documents, including the draft text and explanatory statement of the "Multilateral Convention on the Implementation of Amount A of Pillar One," the "Legislative Template for Global Anti-Base Erosion Rules," "Taxation Rules," "Multilateral Convention to Facilitate the Implementation of Taxation Rules of Pillar Two," and its explanatory statement, indicating continuous progress in the design and implementation of the two-pillar solution. On December 18, 2023, the OECD announced the postponement of the work related to Amount A of Pillar One, planning to complete the negotiations on the "Multilateral Convention on the Implementation of Amount A of Pillar One" by the end of March 2024 and hold a signing ceremony for the convention by the end of June 2024.
5. High-level International Seminar on Tax Administration Digitalization Reaches Consensus on Promoting Digital Transformation
From October 19 to 20, 2023, the High-level International Seminar on Tax Administration Digitalization, hosted by the State Administration of Taxation of China, was held in Beijing. Representatives from tax departments of 20 countries in Asia, Africa, Europe, the Americas, and Oceania, 6 international organizations, as well as some academic institutions and multinational enterprises, gathered to engage in in-depth discussions on topics such as digital transformation of tax administration, innovation in tax services, and optimization of the tax business environment, reaching multiple consensuses. Participants expressed that in-depth exchanges and sharing of practical experiences among countries are crucial for achieving digital transformation goals and will further promote the construction of a multilateral tax cooperation platform, jointly building a closer and higher-quality international tax cooperation system. Wang Jun, the former Director of the State Administration of Taxation of China, attended the meeting and delivered a keynote speech on advancing the digital transformation and upgrading of tax administration.
6. United Nations Releases "Pricing Guidelines for Carbon Offset and Carbon Credit Transfer"
On October 17, 2023, the 27th meeting of the United Nations International Cooperation Expert Committee approved the "Pricing Guidelines for Carbon Offset and Carbon Credit Transfer." This is the first set of guidelines to help countries conduct transfer pricing analysis for carbon credit transactions between companies, addressing major issues such as how carbon credits are generated and traded, explaining potential transfer pricing impacts, and can be used to prevent double taxation and tax evasion. The guidelines include regulatory frameworks, total control and trading systems, baselines and credit plans, significance for developing countries, the importance of transfer pricing, project value chain analysis (including three case studies - reforestation projects, clean stoves, and emission reduction projects in mining), carbon credit transfer, purchase of carbon credits, trading of carbon quotas, pricing of carbon credits, trading of carbon credits, and retirement.
7. OECD Releases "International Standard for Automatic Exchange of Tax Information: Cryptographic Asset Reporting Framework and 2023 Revised Common Reporting Standard"
On June 8, 2023, the OECD Forum on Tax Transparency and Information Exchange (Global Forum) released the "International Standard for Automatic Exchange of Tax Information: Cryptographic Asset Reporting Framework and the 2023 Revised Common Reporting Standard," including the "Cryptographic Asset Reporting Framework" (CARF), the "2023 Revised Common Reporting Standard" (CRS), related comments, and information exchange frameworks, which together constitute the international standard for automatic exchange of tax information. The "Cryptographic Asset Reporting Framework" specifies the automatic exchange of tax information on cryptographic assets, and the "2023 Revised Common Reporting Standard" includes certain electronic currency products and central bank digital currencies within its scope. According to a press release issued by the OECD on November 10, 2023, 48 countries and regions plan to implement the "Cryptographic Asset Reporting Framework" by 2027.
8. EU Carbon Border Adjustment Mechanism Officially Launched
On October 1, 2023, the first phase of the EU Carbon Border Adjustment Mechanism (CBAM), commonly known as the "EU Carbon Tariff," was launched. The transition period is from October 1, 2023, to December 31, 2025, and it will be formally implemented from January 1, 2026, with full implementation by 2034. During the transition period, importers of carbon-intensive industries such as steel, cement, fertilizers, aluminum, electricity, and hydrogen are only required to report their carbon emissions to EU authorities and are not required to purchase CBAM certificates. Starting from January 1, 2026, importers will be required to report the greenhouse gas emissions contained in imported goods and purchase the corresponding number of CBAM certificates annually. The European Commission issued transitional implementation regulations in August 2023, detailing the reporting obligations and information requirements for importers of CBAM goods, as well as the temporary methods for calculating the implicit emissions in the production process of CBAM goods.
9. "Regional Comprehensive Economic Partnership Agreement" (RCEP) Fully Comes into Effect
On June 2, 2023, the "Regional Comprehensive Economic Partnership Agreement" (RCEP) came into effect in the Philippines, making it the last country to ratify RCEP, thus fully implementing RCEP. RCEP was signed by China, Japan, South Korea, Australia, New Zealand, and the 10 ASEAN countries on November 15, 2020. It officially came into effect on January 1, 2022, for Brunei, Cambodia, Laos, Singapore, Thailand, Vietnam, Australia, China, Japan, and New Zealand; on February 1, 2022, for South Korea; on March 18, 2022, for Malaysia; on May 1, 2022, for Myanmar; on January 2, 2023, for Indonesia; and on June 2, 2023, for the Philippines.
10. EU Tax Observatory Releases "Global Tax Evasion Report 2024"
On October 23, 2023, the EU Tax Observatory released the "Global Tax Evasion Report 2024" for the first time, emphasizing the continued existence of offshore tax evasion due to non-compliance by offshore financial institutions and limitations in bank information automatic exchange. The report calls for strengthening the imposition of a global minimum tax on multinational companies. It is estimated that if a 2% minimum wealth tax is imposed on approximately 2700 of the world's top billionaires, it could generate a total of $250 billion in tax revenue annually. The report points out that billionaires with assets exceeding $1 billion typically use methods such as setting up "shell companies" to transfer assets and hide wealth, and their actual personal income tax paid as a proportion of their personal assets is the lowest compared to all other income groups.
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