«THE OECD GUIDE ON THE PROTECTION OF CONFIDENTIALITY OF INFORMATION EXCHANGED FOR TAX PURPOSES ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ...»
Keeping It Safe
THE OECD GUIDE ON THE PROTECTION OF
CONFIDENTIALITY OF INFORMATION EXCHANGED FOR
Keeping It Safe
THE OECD GUIDE ON THE PROTECTION OF CONFIDENTIALITY
OF INFORMATION EXCHANGED FOR TAX PURPOSES
ORGANISATION FOR ECONOMIC CO-OPERATION
AND DEVELOPMENTThe OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies.
The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Union takes part in the work of the OECD.
Photo credits: cover photo © Andrea Danti – Fotolia.com TABLE OF CONTENTS – 3 Table of Contents Introduction
Part I. Legal Framework to Protect the Tax Confidentiality of Information Exchanged
1. Tax confidentiality provisions in tax treaties, TIEAs and multilateral instruments on mutual administrative assistance
2. Tax confidentiality provisions in domestic legislation
Part II. Administrative Policies and Practices to Protect Confidentiality........... 15
2. Comprehensive policy and procedures in place, reviewed and approved at top level
3. Practices adopted by tax administrations to protect the tax confidentiality of information during the transmission of information exchanged under a tax treaty or other exchange of information instrument
4. Practices adopted by taxadministrations to ensure the confidentiality of information that has been received from a treaty partner
Part III. Recommendations
I. Legal Framework
II. Administrative Policies and Practices to Protect Confidentiality
Part IV. Checklist
Annex A. Confidentiality Provisions in Exchange of Information Instruments
Model Agreement on Exchange of Information on Tax Matters
The Multilateral Convention on Mutual Administrative Assistance in Tax Matters as amended by the 2010 Protocol
Annex B. Domestic Tax Confidentiality Provisions in Selected Countries........... 37 Annex C. Country Example
The number of exchange of information agreements has increased dramatically in recent years and in order for countries to take advantage of the opportunities that this rapidly expanding network provides, countries and their taxpayers need to have confidence in the confidentiality of the information exchanged under these agreements. Both taxpayers and tax administrations have a legal right to expect that information exchanged under exchange of information agreements remains confidential. This requires that exchange of information partners have adequate safeguards to protect the confidentiality of the information that is shared and assurances that the information provided will only be used for the purposes permitted under the exchange of information instrument.
Confidentiality of taxpayer information has always been a fundamental cornerstone of tax systems. In order to have confidence in their tax system and comply with their obligations under the law, taxpayers need to have confidence that the often sensitive financial information is not disclosed inappropriately, whether intentionally or by accident. Citizens and their governments will only have confidence in international exchange if the information exchanged is used and disclosed only in accordance with the agreement on the basis of which it is exchanged. As in the domestic context, this is a matter of both the legal framework as well as having systems and procedures in place to ensure that the legal framework is respected in practice and that there is no unauthorized disclosure of information. What applies in the domestic context regarding protecting the confidentiality of tax information equally applies in the international context.
The report sets out the best practices related to confidentiality and provides practical guidance, including recommendations and a checklist, on how to meet an adequate level of protection while recognising that different tax administrations may have different approaches to ensuring that in practice they achieve the level required for the effective protection of confidentiality. Of course, the first step is ensuring that appropriate legislation is in place, but the confidentiality of taxpayer information within a tax administration is not simply the result of legislation. The ability to protect the confidentiality of tax information is also the result of a “culture of care” within a tax administration. This requires that confidentiality
KEEPING IT SAFE © OECD 20126 – INTRODUCTION
measures be incorporated into all the operations of the tax administration.
Confidentiality is a cornerstone for all functions carried out within the tax administration and as the sophistication of the tax administration increases, the confidentiality processes and practices must keep pace.
This report provides general guidance on how tax administrations protect the confidentiality of taxpayer information both domestically in the tax administration as a whole, and also specifically with regard to exchange of information under exchange of information (EOI) instruments. Examples of certain country practices are provided to illustrate how some countries are addressing this very complex subject. Recommendations in Part III provide guidance on the rules and practices that must be in place to ensure the confidentiality of tax information exchanged under exchange of information instruments. For ease of reference the report also contains a checklist.
1. Tax confidentiality provisions in tax treaties, Tax Information Exchange Agreements (TIEA) and multilateral instruments on mutual administrative assistance Effective mutual assistance between competent authorities requires that each competent authority be assured that the other will treat with proper confidence the information which it obtains in the course of their co-operation. For this reason all treaties and exchange of information instruments contain provisions regarding tax confidentiality and the obligation to keep information exchanged as secret or confidential. 1 Information exchange partners may suspend the exchange of information if appropriate safeguards are not in place or if there has been a breach in confidentiality and they are not satisfied that the situation has been appropriately resolved.
• Treaty provisions and domestic laws both apply to ensure confidentiality.
• Information exchanged may only be used for certain specified purposes.
• Information exchanged may only be disclosed to certain specified persons.
1 The complete text of the confidentiality provisions of the OECD Model Tax Convention, the TIEA and the multilateral Convention on Mutual Administrative Assistance in Tax Matters can be found in Annex A.
KEEPING IT SAFE © OECD 2012 8 – PART I. LEGAL FRAMEWORK
1.1 Confidentiality under Article 26 of the OECD Model Tax Convention
Article 26(2) of the OECD Model Tax Convention provides that:
Any information received under paragraph 1 by a Contracting State shall be treated as secret in the same manner as information obtained under the domestic laws of that State and shall be disclosed only to persons or authorities (including courts and administrative bodies) concerned with the assessment or collection of, the enforcement or prosecution in respect of, the determination of appeals in relation to the taxes referred to in paragraph 1, or the oversight of the above. Such persons or authorities shall use the information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions.
This provision states that information received under the provisions of a tax treaty shall be treated as secret in the same manner as information obtained under the domestic laws of the receiving State. Article 26 goes on to provide the confidentiality rules under the Model Convention, the purposes for which the information may be used and limits to whom the information may be disclosed.
in relation to the taxes with respect to which information may be exchanged under the treaty.
Information may also be communicated to the taxpayer, his proxy or to a witness. Information can be disclosed to governmental or judicial authorities charged with deciding whether such information should be released to the taxpayer, his proxy or to the witnesses. The information shall only be used for the above purposes. Courts and administrative bodies involved in the tax purposes discussed in paragraph 9 can disclose the information in court sessions or court decisions, once information becomes KEEPING IT SAFE © OECD 2012 PART I. LEGAL FRAMEWORK – 9 public in this way, that information can then be used for other purposes. 2 The confidentiality rules cover competent authority letters, including the letter requesting information. It is understood that the requested state can disclose the minimum information contained in a competent authority letter (but not the letter itself) necessary for the requested state to be able to obtain or provide the requested information to the requesting state, without frustrating the efforts of the requesting state.
Information may also be disclosed to oversight bodies.
Information may not be disclosed to a third country unless there is an express provision in the bilateral treaty allowing it. It may not be used for other (non-tax) purposes unless otherwise specified in the treaty. In this respect countries may include a provision which allows the sharing of information with other law enforcement agencies when such information may be used for such other purposes under the laws of both countries and the competent authority of the supplying countries authorises such use.
The provisions of Article 26(2) concern information exchanged under Article 26 and also apply to information exchanged relating to the Mutual Assistance Procedure and Assistance in Tax Collection.
1.2 Confidentiality under Article 8 of the Model Agreement on Exchange of Information on Tax Matters (“TIEA”)
Article 8 of the TIEA provides that:
Any information received by a Contracting Party under this Agreement shall be treated as confidential and may be disclosed only to persons or authorities (including courts and administrative bodies) in the jurisdiction of the Contracting Party concerned with the assessment or collection of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, the taxes covered by this Agreement. Such persons or authorities shall use such information only for such purposes. They may disclose the information in public court proceedings or in judicial decisions. The information may not be disclosed to any other person or entity or authority or any other jurisdiction without the express written consent of the competent authority of the requested Party.
The TIEA is similar to the Model Convention as they both require that information be kept confidential and limit the persons to whom the information can be disclosed and the purposes for which the information 2 Paragraphs 12-13 of the Commentary to Article 26 of the Model Convention.
KEEPING IT SAFE © OECD 2012 10 – PART I. LEGAL FRAMEWORK may be used. The Model Convention contains the additional requirement that information should be treated “as secret in the same manner as information obtained under domestic law.” However, because both the TIEA and the Model Convention specify to whom the information can be disclosed and for what purposes the information may be used (thus ensuring a minimum standard of confidentiality), there should be little practical difference between the two formulations. 3 There are also some differences.
First, the Model Convention also permits disclosure to oversight authorities 4. Second, the TIEA expressly permits disclosure to any other person, entity, authority or jurisdiction provided express written consent is given by the competent authority of the requested party.
1.3 Confidentiality under Article 22 of the multilateral Convention on Mutual Administrative Assistance in Tax Matters
The Multilateral Convention states:
Article 22 – Secrecy
1. Any information obtained by a Party under this Convention shall be treated as secret and protected in the same manner as information obtained under the domestic law of that Party and, to the extent needed to ensure the necessary level of protection of personal data, in accordance with the safeguards which may be specified by the supplying Party as required under its domestic law.
2. Such information shall in any case be disclosed only to persons or authorities (including courts and administrative or supervisory bodies) concerned with the assessment, collection or recovery of, the enforcement or prosecution in respect of, or the determination of appeals in relation to, taxes of that Party, or the oversight of the above. Only the persons or authorities mentioned above may use the information and then only for such purposes. They may, notwithstanding the provisions of paragraph 1, disclose it in public court proceedings or in judicial decisions relating to such taxes.