Finance ministers and officials from 51 countries have signed an agreement to automatically share tax information, marking a huge leap in the global crackdown on tax evasion.

Finance ministers and officials from 51 countries have signed an agreement to automatically share tax information, marking a huge leap in the global crackdown on tax evasion.

The new OECD standard on automatic exchange of information was endorsed yesterday by all OECD and G20 countries as well as major financial centers taking part in the annual meeting of Global Forum on Transparency and Exchange of Information for Tax Purposes in Berlin.

Developed by the OECD, together with the Group of 20 countries, the new standard calls on governments to obtain information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis.

While the US was not among the 51 countries to sign the agreement, a number of jurisdictions known for their bank secrecy have, including Bermuda, the British Virgin Islands, Liechtenstein and the Cayman Islands.

“While the US is not a signatory to today’s agreement, any branch or subsidiary of a US financial institution in an implementing jurisdiction will need to comply with the Common Reporting Standards in that jurisdiction,” said Michael Plowgian, a principal in KPMG’s Washington national tax office.

“The fact that the US has not implemented the Common Reporting Standard may actually create additional challenges for US-based financial institutions in coordinating implementation across the various jurisdictions in which they do business,” said Plowgian.

The early adopters who signed the agreement have pledged to work towards launching their first information exchanges by September 2017, while others are expected to follow in 2018.

A status report on committed and not committed jurisdictions will be presented to G20 leaders during their annual summit in Brisbane, Australia next month.

“We are making concrete progress toward the G20 objective of winning the fight against tax evasion,” OECD Secretary-General Angel Gurria said after the signing ceremony.

“The fact that so many jurisdictions have agreed today to automatically exchange financial account information shows the significant change that can occur when the international community works together in a focused and ambitious manner. The world is quickly becoming a smaller place for tax cheats, and we are determined to ensure that developing countries also reap the benefits of greater financial sector transparency,” Gurria added.

Offshore tax evasion remains a serious problem for countries and jurisdictions worldwide, with vast amounts of funds deposited abroad and sheltered from taxation when taxpayers fail to comply with obligations in their home countries.

Following the global financial crisis, governments in Europe and the US have made it a key priority to increase transparency and crack down on tax evasion and secrecy.

The Paris-based OECD said earlier this year that in an analysis of voluntary disclosure programs since 2009, more than half a million taxpayers have voluntarily disclosed income and wealth hidden from their tax authorities totaling €37 billion ($59.13 billion).

Jennifer Sponzilli, a principal with KPMG’s US international tax team in the UK, said that now the agreement had been signed, there will be a “race against the clock” for both governments and financial institutions to meet the ambitious timelines.

“Governments will likely need to enact legislation or regulations to effectuate the Multilateral Competent Authority Agreement in their jurisdictions. Financial institutions will be working hard to get customer due-diligence procedures in place by January 1, 2016 – less than 15 months from now – and then will turn to meet the deadline for the first reporting of information about non-resident account holders required in 2017,” Sponzilli added.