Taxation Law - The Purpose of Tax Information Exchange Agreements (TIEA's) and the Current Status of Proposals for Australia on TIEA's - Part 1
Author(s):Tony Anamourlis B.A., LL.B., MTaxLaw, GradDipLegPrac, SJD Candidate (La Trobe); ATIA
Publish Date: December 11, 2009
In any attempt to reduce the impact of tax havens and discover any questionable cross border transactions, the role of TIEA’S is important. The exchange of information between jurisdictions serves three purposes for tax administrators:
- The information received from the requesting country is used to ascertain facts in relation to income and capital of a tax treaty partner; and
- The information received from the requesting country is to assist that country in administrating and or enforcing its own domestic laws; and
- More importantly it serves as a mechanism that will enable tax authorities to solicit cooperation from foreign governments and more effectively prosecute tax and related white-collar crime.[1]
The TIEA is based on written agreements and the most common is based on bilateral income tax treaties [2]. For example, the USA, which is one of the pioneer countries in the area of TIEAs, currently has 24 TIEA’s in force with other countries. It also has other agreements which are used to facilitate Exchange of Information, which include, various EC Directives, Mutual Legal Assistance Treaties (MLAT’s) used in criminal matters and domestic agreements on US Federal and State Tax Information Sharing Agreements [3]. Since 2006, however, the signing of a small number of TIEAs has been reported. Some of the recent TIEA’s which have been signed include the following countries:
- Antigua and Barbuda (January 30 2007)
- Netherland Antilles (March 1, 2007),
- Bermuda (15 November 2005)
- British Virgin Islands (27 October 2008)[4]
- Gibraltar (25 August 2009)
- Isle of Man (29 January 2009)
- Jersey (10 June 2009)
It can be concluded that the OECD’s proposals on harmful tax practices are being implemented at a very slow pace. At present, Australia has in place 41 bilateral standard tax treaties, which are a mirror of Article 26 of the OECD’s Model Convention on Income and Capital.
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[1] Bruce Zagaris, (2003) “Dollar Diplomacy: International Enforcement of Money Movement and Related Matters – A United States Perspective”, 22 Geo. Wash. J. Int’I L. & Econ, 465 at p465-482.
[2] See Article 26 of the OECD Tax on Income and Capital.
[3] Susan Stanley and Lou Carlow, “Impact of Exchange of Tax Information between the IRS and Foreign Tax Authorities”, Corporate Taxation, May/June 2008, 35, 3, Accounting & Tax Periodicals , p3-8.
[4]OECD, Tax Policy and Administration “Tax Information Exchange Agreements”. Also see the following hypo link to view the model tax information exchange agreement. click here It interesting to note that the US are more actively involved in finalizing TIEAs with tax havens as opposed to any other Commonwealth country including Australia.
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