Automatic Exchange of Information (AIE) is when the tax authorities of two or more states share financial information related to all types of wealth (including immovable property such as houses or land) and taxable activity (e.g. dividends, interests, royalties, salaries, pensions, VAT refunds, etc.) on an automatic, periodic basis. In this system information is routinely collected in the country where the taxable activity occurs or the wealth is held, and shared with the country where taxes are due without a formal request being required. The system can be formalised in either bilateral or multilateral agreements between state parties.
Why it matters
This process is seen as the best way to assess and collect taxes where they may be due. Governments should adopt and implement automatic exchange of information as the global standard since it enables more effective and quicker cross-border information-sharing which helps overcome legal, operational and political barriers to international cooperation. It increases transparency in the financial system and can reduce tax avoidance and evasion.