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I have heard a rumor that due to the upcoming Common Reporting Standard the details of bank accounts, including all transactions, will be reported all around the industrialized world and want to know if this is true.

The scenario involved is this:

A person who is a student in one OECD country (for example Australia) has property in his home nation (for example Canada). He sells the property which is located in Canada. This causes a large deposit of money to appear in his bank account in his home country of Canada. The allegation is that the country in which he is a student, Australia, will find out about this deposit, then audit the student for the purpose of determining whether he is a "tax resident" of Australia in hopes of collecting taxes on the cash deposit in Canada.

This scenario seems completely implausible to me, but the source of the claim is an experienced tax barrister so I do not want to dismiss it out of hand.

Is it really true that the Common Reporting Standard is going to cause things like this to happen? (students in one country getting audited because of large deposits to their banks in their home country)

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    This agreement between nations does not effect any national tax laws. It simply makes it easier for national authorities to detect tax avoidance. If you are tax resident in Australia then you are required to declare and pay taxes on all income, including foreign income. Tax treaties between nations mean that you will receive a tax credit for any withholding tax you may have paid in a foreign country with which a tax treaty exists, so you will not be double taxed although you may have to pay additional tax if your tax resident rates are higher than those rates in the foreign country.
    – nwr
    Dec 30 '16 at 0:34
  • @NickR I know all that. The question is whether Australia is going to be able to view the bank account statements of all the foreign students they have from OECD countries even though those accounts might be in other countries besides Australia. Dec 30 '16 at 0:38
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    If they have reason to request the information, then apparently they will. There would have to be some reason for them to suspect tax avoidance, it would not be a matter of routine.
    – nwr
    Dec 30 '16 at 0:40
  • @NickR So, according to your reading of the agreement, countries will specifically have to request the records from other countries for particular people, they will not automatically get blanket downloads of foreign bank account information belonging to students resident in their country? Dec 30 '16 at 0:43
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    Yes, that is certainly my understanding. Tax authorities would be required to present reasons for suspecting avoidance. A country like Australia or Canada will have tens of thousands of foreign nationals resident for tax purposes at any given time. It would be entirely impractical to inspect all of the associated data. There are also security and privacy issues involved in a blanket transfer of data.
    – nwr
    Dec 30 '16 at 0:49
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Before this agreement, every country had laws on tax-ability of income [including Global incomes]. Quite a few individuals would get away and did not report such income and pay tax if due. In fact quite a few Multi National banks actively created products that helped US Citizens to move money outside and skip reporting.

U.S. in order to step up this effort enacted FATCA; essentially as a compliance mechanism, it started with US Head quartered banks operating globally and made reporting mandatory. It stepped up efforts with other countries to ensure foreign banks also enhance reporting of US nationals.

See the benefits, quite a few countries joined up together and as part of OECD, came up with CRS. Thus going forward it will enable tax authorities in member countries to exchange financials impacting taxes.

The scope is also for Companies / Organization as quite a few Companies hide away income outside the domiciled country.

I have heard a rumor that due to the upcoming Common Reporting Standard the details of bank accounts, including all transactions, will be reported all around the industrialized world and want to know if this is true.

Yes this is true and it is not a rumor. The exact amount of data and type of data will be agreed between member countries. However a broad framework exists on what needs to be shared.

Is it really true that the Common Reporting Standard is going to cause things like this to happen?

It is very important to note; There is no new Tax Legislation. Even without FATCA/CRS, a honest tax payer was bound to pay legitimate tax due as per the existing tax provisions of the country along with the provisions of DTAA [Dual Tax Avoidance Agreements].

The CRS only enables monitoring and compliance. So if one was already tax compliant, there is nothing to worry. If one was exploiting the loop hole; how will authorities know ... well this will be curbed going forward.

As a note, Canada and Australia will start CRS reporting from 2018.

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    Your statement about "if one was already tax compliant, there is nothing to worry about" is somewhat misleading with regard to FATCA. FATCA imposes significant penalties for failing to disclose assets (not income) held in foreign countries, even if they have no immediate impact on tax liability. So simply passively holding a foreign investment that creates no taxable income could still result in a large penalty just for failing to disclose that you own that asset. This is somewhat tangential to the question at hand but is worth noting for US residents who may read this later.
    – BrenBarn
    Dec 30 '16 at 22:35
  • @BrenBarn I guess asset reporting was already there, and not introduced by FATCA. Agreed penalties were increased.
    – Dheer
    Dec 31 '16 at 2:04

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