UPDATE 1-Uruguay, Argentina in accord to fight tax evasion

* The two countries agree to share tax data

* OECD had urged Uruguay to strike a deal

* Argentines frequently stash cash in Uruguayan banks (Adds detail on Argentine inspectors’ powers)

MONTEVIDEO, April 24 (Reuters) - Uruguay and Argentina agreed to exchange tax data in a deal that gives Argentine inspectors the power to dig up information on savers with bank accounts in the neighboring country, officials said on Tue sday.

The agreement followed months of negotiations. The Organization for Economic Cooperation and Development had urged Uruguay to strike such accords with its biggest trading partners, among them Argentina and Brazil.

Both countries’ legislatures are expected to ratify the deal by mid-year. It will only apply to financial transactions that take place after the accord takes effect, despite Argentina’s initial request that it also be used retroactively.

Tax agents will only be able to share information in specific cases where there is evidence of evasion.

"This is a fundamental tool for international cooperation on tax matters," Uruguay’s economy minister, Fernando Lorenzo, told a news conference. He added that the agreement also aims to avoid taxing people or companies twice, a point crucial to Uruguay.

Uruguay was historically a magnet for Argentine savings thanks to its banking secrecy rules, which were overhauled in December 2010, largely to comply with OECD standards.

Argentine investors also have a strong presence in Uruguay’s agricultural and real estate markets.

By the end of last year, Argentine savers had nearly $2.3 billion deposited in Uruguayan banks, according to data from Uruguay’s central bank.

In December, the OECD moved Uruguay off a global watch list created to pressure countries to crack down on tax cheats after the country signed a series of new tax cooperation accords.

Argentina’s AFIP tax agency had been seeking the agreement with Uruguay for years to combat evasion. The AFIP will be able to obtain information on Argentines with holdings in Uruguay but only via requests stemming from individual evasion probes.

In a bid to stem capital flight, Argentine President Cristina Fernandez tightened the screws on savers and companies in October, requiring that the AFIP pre-approve all foreign currency purchases.

This has fueled more foreign-exchange transactions on Argentina’s black market. (Additional reporting by Malena Castaldi; Writing by Hilary Burke; Editing by Dan Grebler)