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Sharing of information between tax authorities set to escalate says ITS International

Sharing of information between tax authorities set to escalate says ITS International

The OECD (Organisation for Economic Cooperation and Development) has just updated Article 26 of its Model Tax Convention (often referred to by recruiters and their expatriate contractors as “double taxation treaty”).  The update is endorsed by all OECD member countries, including the whole of Europe and most of the rest of the world.  The current Article allows information to be made available upon request by one country’s tax office to another country’s tax office, providing the information is “foreseeably relevant” for the administration of the taxes of the requesting country regardless of bank secrecy and a domestic tax interest.

The update now allows a tax office in one country to ask for information on a & lsquo;group of taxpayers’ from another country, without having to name those taxpayers individually.  A & lsquo;group of taxpayers’ could comprise current and previous account holders at the same bank.  Another & lsquo;group of taxpayers’ could comprise current or past employees or contractors at the same client site.

The update retains protections against so-called & lsquo;fishing expeditions’ requiring investigators from a tax office in one country having to “demonstrate” to a tax office in another country that there is evidence of fiscal crime having been perpetrated.  As there is no independent arbiter to assess the strength or flimsiness of the furnished evidence, the risk of abuse (inadvertent or otherwise) remains.

On a more positive note, the OECD claims the update “facilitates exchange of information among law enforcement agencies to fight tax crimes and other criminal activities more effectively”.

This move is likely to be yet another nail in the coffin of unscrupulous service providers and any recruiter who blindly believes & lsquo;contractor compliance’ is nothing to do with them. 

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