Multilateral Convention on Mutual Administrative Assistance in Tax Matters The Convention on Mutual Administrative Assistance in Tax Matters: An increasingly Global Instrument to Fight Offshore Tax Evasion and Avoidance 46th CIAT General Assembly April, 2012, Santiago, Chile. By Pascal Saint-Amans Director of the Centre for Tax Policy and Administration OECD 1

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Evidence-based policy dialogue

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Belgium, Denmark, Finland, France, Georgia, Germany, Greece, Iceland, Ireland, Italy, Moldova, Netherlands, Norway, Poland, Portugal, Russia, Slovenia, Spain, Sweden, Turkey, Ukraine and United Kingdom Canada United States Mexico Costa Rica 34 Countries have signed the Multilateral Convention and more countries are expected to adhere to it soon Australia Indonesia Argentina Brazil India Japan Korea South Africa 3

Multilateral Convention on Mutual Administrative Assistance in Tax Matters 4 Global Forum Members

Multilateral Convention on Mutual Administrative Assistance in Tax Matters An increasingly Global Instrument: All G20 countries have signed the Convention (China and Saudi Arabia committed to sign) 11 CIAT countries (Argentina, Brazil, Canada, Costa Rica, France, Italy, Mexico, Netherlands, Portugal, Spain and U.S.)have signed the Convention so far : – Colombia has officially expressed its interest to adhere to the Convention An increased interest of developing countries in the Convention 5

Multilateral Convention on Mutual Administrative Assistance in Tax Matters An increasingly Global Instrument: The opening of the Convention beyond OECD and Council of Europe membership offers a valuable opportunity for countries to swiftly implement their commitments to the internationally agreed standards of transparency and exchange of information for tax purposes and for emerging and developing countries to secure benefits of the new co- operative tax environment. 6

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Presentation of the Convention Background EOI on request and beyond Benefits of the Convention Process for Accession 7

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Background Initially developed under the auspices of the OECD and of the Council of Europe (CoE) and open for signature since 1988 by members of the CoE or OECD G20 call for a multilateral instrument for international cooperation in tax matters open to all countries to benefit developing countries. The Convention was upgraded to bring it in line with the internationally agreed standard of transparency and exchange of information and open it for signature to all countries. Protocol opened for signature in May 2010 entered into force on 1st June

Multilateral Convention on Mutual Administrative Assistance in Tax Matters EOI on Request and Beyond the Standard EOI on request: when the information is foreseeably relevant for the administration or enforcement of taxes Automatic exchange: an option Assistance in recovery of tax claims 9

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Benefits of the Convention (1) It provides a single umbrella for multi-party cooperation It covers all taxes including indirect taxes It covers assistance in recovery It is a flexible instrument: it allows for reservations which can be withdrawn at a later date 10

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Benefits: Multi-party co-operation (2) The Convention can be used for bilateral but also multilateral simultaneous tax examinations (STE) covering both direct and indirect taxes It can serve as an umbrella for multilateral exchange of information on Aggressive Tax Planning schemes (i.e. for JITSIC type initiatives) It can be used for regional co-operation: industry wide exchange, STE, joint audits etc 11

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Benefits: use for VAT/GST purposes (3) VAT fraud and avoidance schemes tend to become increasingly global and may involve more than two countries (ex: carousel fraud) Not all DTCs cover VAT/GST for exchange purposes and amending DTCs takes time as compared to joining the Convention The Convention can be useful to identify missing trader fraud, for tax audits concerning cross-border supply of services and intangibles etc 12

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Wide range of Taxes covered Taxes on income or profits, capital gains, net wealth, both local and national Compulsory social security contributions Estate, inheritance or gift taxes Taxes on immovable property General consumption taxes, e.g. VAT/GST Specific taxes on goods and services such as excise taxes Taxes on the use or ownership of motor vehicles Taxes on the use or ownership of movable property other than motor vehicles Any other taxes except customs duties 13

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Extensive forms of cooperation Exchange of information (EoI) on request, Spontaneous, Automatic exchange of information Simultaneous tax examinations Tax examinations abroad Assistance in recovery and measures of conservancy Service of documents NB: Parties are not prevented from making use of any other advance techniques for EoI, when their domestic laws so permit, industry wide exchange programmes or joint audits 14

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Limitations to provide assistance (1) Convention does not affect rights and safeguards secured to persons by the laws or administrative practice of the requested State Other limitations may include: – measures at variance with the laws or administrative practice of either State – measures which would be contrary to public policy – information which is not obtainable under either State laws or administrative practice – trade, business, industrial, commercial or professional secret – taxation by the applicant State contrary to generally accepted taxation principles or to the bi-lateral tax treaty that may be in force between the Countries concerned – discriminatory treatment of applicant State – applicant State has not pursued all reasonable measures available – assistance in recovery where burden disproportionate to benefit 15

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Confidentiality Information shall be treated as secret and protected in the receiving State in the same manner as information obtained under its domestic laws. If personal data are provided, the Party receiving them shall treat them in compliance not only with its own domestic law, but also with the safeguards that may be required to ensure data protection under the domestic law of the supplying Party. Information shall be disclosed only to persons or authorities, and be used only for the purposes, indicated in the Convention. They may however be disclosed in public court proceedings or in judicial decisions relating to taxes covered by the Convention. 16

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Use of information received for non tax purposes Information received by a Party may be used for other purposes: e.g. to combat money laundering, corruption, or terrorism financing when (i) such information may be used for such other purposes by the Party supplying the information (ii) the competent authority supplying the information authorizes such use: This makes it a powerful tool for a whole government approach to combat tax crimes and other financial crimes 17

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Relationship with other instruments Possibilities of assistance provided by the Convention do not limit, nor are limited by, those contained in existing or future international agreements or other arrangements between the Parties, or other instruments that relate to cooperation in tax matters States are at liberty to choose whichever instrument they think most appropriate to the particular case. 18

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Coordinating Body A Coordinating Body consisting of the competent authorities of the Parties to the Convention ensures a consistent implementation of the Convention, specifically: – acts as a forum for the study of new methods and procedures to increase international co-operation in tax matters; – may recommend revisions or amendments to the Convention. – assists the Parties by furnishing opinions on questions of application or interpretation of the Convention Decisions to invite States (not members of the OECD or of the CoE) to sign the Convention are taken by the Parties through the Coordinating Body. 19

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Territorial application / entry into force / date of effect Territories: Parties may specify the territory or territories to which the Convention shall apply upon signature, when depositing the instruments of ratification, accession or approval, or at a later stage Entry into force: first day of the month following the expiration of a period of three months after a State expressed consent to be bound. Date of effect: – For civil tax matters, unless agreed otherwise by the Parties, only in relation to future tax periods. – For criminal tax matters, as soon as it enters into force, and therefore also in relation to past tax periods. 20

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Reservations The Convention provides for the possibility to enter reservations concerning : 1.administrative assistance of any kind in respect of taxes other than those on income, profits, capital gains or net wealth imposed at the central government; 2.recovery of tax claims or administrative fines, including measures of conservancy; 3.administrative assistance in respect of tax claims in existence before the entry into force of the Convention; 4.the service of documents; 5.the use of postal services in the service of documents; 6.the date of effect of the Convention for criminal tax matters, restricting it to taxable periods from the fourth year before the entry into force of the Convention. 21

Multilateral Convention on Mutual Administrative Assistance in Tax Matters Process for Accession OECD/CoE countries can simply sign the Convention Non-OECD / non-CoE countries shall follow a specific procedure: – Send a Request to be invited to become a Party to the Depositary of the Convention – Complete a confidentiality questionnaire – Depositary transmits the requests to the Parties – Decision of the Parties through the Coordinating Body – Invitation to become a Party issued – Signature 22

Multilateral Convention on Mutual Administrative Assistance in Tax Matters GRACIAS More information is available on the OECD website including: – The Convention available in English, French and Spanish and Portuguese – The Explanatory Report in English, French and Spanish – Process to become a Party to the amended Convention – List of Declarations, Reservations and other Communication – Chart of signatures and ratifications 23