Purposes of Exchange of Information Komal Mohindra Global Tax Simplification Team Investment Climate Department July 24, 2012 EOI Workshop – Plantation, FL

THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency What is EOI used for? 2 PURPOSESCONSIDERATIONS Transparency means a more level playing field- better climate for business How high of a priority is it? Strong signaling effect to trading partners, political benefits Takes time and resources Identifying tax evasion may lead to higher revenues May lose some investors (but did you want them there in the first place?) Fits with broader governance/anti- corruption initiatives(FATF, AML) Management of internal stakeholders – strong political lobbies Tracing proceeds of corruption Opportunity for improving domestic tax administration and enforcement Opportunity for supporting transparency and good governance in tax law and administration

THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Meeting international standards can help with domestic enforcement too  Transfer Pricing enforcement  Ill – gotten funds, through banks  Refinements to certain domestic rules easier – ie. accounting standards  Residence based systems tax taxpayers on world wide income on a self-assessment basis. Need corroborating information. Examples: understated proceeds, fictitious payments, undeclared overseas income  Details of ownership structures and beneficial ownership information  Unusual credit conditions, service charges, product prices (check relationship between parties)  Undocumented agency relationships  Income reported by owners other than true beneficial owners 3

THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Example – Transfer Pricing Enforcement 1) Related parties - To determine relationships between foreign and domestic entities 2) Corresponding adjustments – Basis for TP adjustment in an another jurisdiction, CA are generally not mandatory but are made where agreement in approach and in the amount 3) MAP under Article 25 – for cases of double tax, also for APA monitoring 4) Building and verifying comparables

EOI in Criminal Tax Cases

THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Criminal tax matters = all tax matters involving intentional conduct, which are liable to prosecution under the criminal laws of the requesting party. Absolute or strict liability provisions do not constitute “criminal matters”. (per Model TIEA) “Criminal” per domestic law (not necessarily in tax law), does not include criminality under international conventions Effective date under Model TIEA is earlier (generally can apply to certain prior periods) than non-criminal matters (usually forward looking) Examples: Wilful failure to file a return on time Wilful omission or concealment of sums subject to tax Deliberate omissions of accounting entries Criminal cases are covered under EOI requests 6

THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Privilege against self-incrimination: Likely not much application, cannot be claimed by an individual who personally is not at risk of criminal prosecution. Most information requests seek to obtain information from third parties such as banks, intermediaries or the other party to a contract and not from the individual under investigation. This privilege generally only applies to natural persons. Attorney – Client Privilege: Can decline on this basis if relating to confidential communications between a client and an attorney, solicitor or other admitted legal representative where the communications are produced for the purposes of seeking or providing legal advice; or produced for the purposes of use in existing or contemplated legal proceedings. However, where the equivalent privilege under the domestic law of the requested Party is narrower than the definition contained in paragraph 3 (e.g., the law of the requested Party does not recognize a privilege in tax matters, or it does not recognize a privilege in criminal tax matters) a requested Party may not decline a request unless it can base its refusal to provide the information on Article 7, paragraph 1. Dual Criminality: Irrespective of whether or not the conduct being investigated would also constitute a crime under the laws of the requested Party. Considerations in criminal tax cases 7

THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency -TIEAs/DTTs -Convention on Mutual Administrative Assistance in Tax Matters -Unilateral exchanges permitted under domestic law -Mutual Legal Assistance Conventions (ie. Anti-Money Laundering, Corruption, etc) -Revisions to FATF standard in 2012: tax crimes are now added to the list of designated predicate offence => improves scope for MLA in criminal tax cases Other avenues for criminal tax matters 8

THE WORLD BANK World Bank Group Multilateral Investment Guarantee Agency Domestic Information Flows for Tax Crimes 9 Information relating to Tax Crimes FIU Tax administratio n Police or public prosecutor Financial Regulators Flows vary between no sharing, obligation to spontaneously share, ability to spontaneously share, share on request, or direct access to info.