El Salvador Urged to Improve Transparency and Cooperation with International Tax Authorities
A recent peer review report by the Organization for Economic Co-operation and Development (OECD) has advised El Salvador to enhance its efforts to combat tax evasion and money laundering by improving its transparency and cooperation with international authorities.
Key Findings and Recommendations
The report assessed El Salvador’s compliance with global standards for exchanging information on taxes and highlighted several areas that require improvement. Specifically, the report noted:
Beneficial Ownership Information
- El Salvador does not have adequate systems in place to ensure that beneficial ownership information is available for all relevant entities and arrangements.
- This makes it difficult for tax authorities to identify the true owners of companies and accounts, allowing potential money laundering and tax evasion schemes to go undetected.
Clarity on Beneficial Ownership
- El Salvador lacks clarity on what constitutes a “beneficial owner” and how to determine control through other means than ownership.
- There is no clear obligation to update beneficial ownership information, making it difficult for authorities to keep track of changes in ownership structures.
Accounting Records
- While the legal framework is in place, some aspects of its implementation require improvement.
- El Salvador is advised to ensure that reliable accounting records are kept for all relevant entities and arrangements.
Access to Banking Information
- El Salvador’s tax authorities can only access banking information if a tax audit has been opened.
- This means that foreign companies or individuals without an NIT may not be subject to the same level of scrutiny.
The OECD recommended that El Salvador take steps to improve its transparency and cooperation with international authorities by:
- Ensuring that beneficial ownership information is available for all relevant entities and arrangements
- Improving the clarity and implementation of accounting record-keeping requirements
- Providing access to banking information, regardless of whether a tax audit has been opened
Importance of Cooperation
The report emphasized the importance of El Salvador’s cooperation in addressing global issues related to tax evasion and money laundering. By improving its transparency and cooperation with international authorities, El Salvador can help ensure that all countries are on an equal footing in their efforts to combat these illegal activities.
Response and Implementation Plans
In response to the report, El Salvador has committed to implementing changes to address these concerns and improve its compliance with global standards for exchanging information on taxes.