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IFA: Information Exchange

29 August 2013   (0 Comments)
Posted by: Author: Caroline Huggett
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Author: Caroline Huggett

The focus of Tuesday’s sessions was information exchange and transfer pricing methods, with the morning plenary session dealing with "Exchange of information and the cross-border cooperation between tax authorities."

Chaired by Ricardo Gomez-Barreda, senior partner of the Spanish law firm Garrigues, the panel included the OECD’s Global Forum tax information exchange chief Monica Bhatia, Manal Corwin (currently heading up both KPMG’s National Service Line for International Corporate Services and its Washington National Tax – International Tax Policy department, but formerly Deputy Assistant Secretary of Tax Policy for International Affairs in the Treasury Department), Bruno Gangemi (founding partner of Macchi di Cellere Gangemi, and an expert in the field of long-standing), Natalia Quinones Cruz (of Colombia’s Quinones Cruz Abogados), and Jennifer Roeleveld (Professor at the University of Cape Town).

Xavier Oberson was the General Reporter for the panel, and began with a look at the historical context of tax information exchange, observing that tax information exchange had got off to a fairly slow start, with nothing of much note happening in this area between the signature of the France-Belgium treaty in 1843 and the development of article 26 of the OECD model treaty – which forms the basis for information exchange standards – in the 1960s.

Although there were various rumblings in the late 1990s and early 2000s, including the development by the Global Forum on Transparency of the Model Agreement on Exchange of Information on Tax Matters, changes to the OECD model treaty made in 2005, and the introduction of the EU Savings Tax Directive in 2005, it was not until what Mr Oberson referred to as the "Big Bang" that the pace really picked up in the area of tax information exchange. Several events contributed to said "Bang," he explained, including the 2008/09 economic crisis, the dispute between Swiss bank UBS and the US tax authority over the bank’s US account holders, and the sale of tax data relating to German taxpayers with bank accounts in Liechtenstein to the German tax authorities.

From there, the topic has seemed to snowball, leading the G20 to observe in 2009 that "The era of banking secrecy is over," and the OECD to develop its "blacklisting" initiative. Increased scrutiny has led to intensive signing of Tax Information Exchange Agreements, it was revealed, with just 44 such agreements signed before 2008, and in the region of 800 signed since then, on a global basis!

The panel went on to outline the different forms of information exchange, namely: on request, automatic, and spontaneous, and to reveal that in addition to the "official" fora looking at such issues, a number of "informal" groupings are being established to facilitate the implementation of tax information exchange. While stressing that banking secrecy provisions within national law have not (generally) been the obstacle that it had been envisioned they might be, it was observed that the taxpayer’s right to privacy should be respected when sharing tax information exchange cross border, with procedures in place to offer some protection in this regard.

Monica Bhatia then went on to discuss the work being done by the Global Forum on Transparency and Exchange of Information for Tax Purposes (acknowledging that perhaps this was not the catchiest name in the world…). She explained the development of the Global Forum’s minimum standard in this area, to which 119 OECD members have committed, and outlined the two-stage peer review process which helps to ensure that this standard is maintained. Bruno Gangemi then went on to look at the effect of the use of intermediaries with regard to the sharing of tax information, particularly in relation to the EU’s Savings Tax Directive, which has been thwarted to an extent by the use of offshore intermediaries (and the fact that interest relating to certain structures and structured products is not covered), to the extent that the amounts of interest income and withholding tax collected between 2007 and 2009 actually decreased, although he pointed out that the European Union has attributed this at least in part to the economic crisis.

Manal Corwin then discussed the mechanisms in place with regard to FATCA, observing that in her previous role with the Treasury, she had been made privy to some of the less savory meanings of the acronym FATCA by disgruntled finance industry representatives… She explained that FATCA represents an extension of the US system of tax reporting (which combines voluntary reporting with third party reporting) at a cross-border level, as the increasing use of offshore and other overseas bank accounts and investment vehicles had weakened the third party reporting element, viewed as crucial to ensuring compliance by the US authorities. Although the initiative was initially highly unpopular, she suggested that through coordination with other national authorities, and various similar initiatives involving other countries both nationally and multilaterally, it has come to be more accepted.

Other forms of cooperation between tax authorities were discussed by Natalia Quinones Cruz, including joint tax audits and simultaneous tax audits, with the pros and cons of both of these procedures, in addition to bilateral APAs, mutual assistance agreements, technical working agreements and cross-border tax training outlined.

Professor Jennifer Roeleveld dealt with the topic of legal problems raised in relation to exchange of information, including taxpayers' right to privacy, banking secrecy issues, and the issue of professional privilege, stressing the need for tax authorities to be open and proactive in making clear to taxpayers what information will be exchanged with other tax authorities, in order to allow them to comply with their obligations.


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