Compliance and information disclosure as regards tax is set to grow as increasing number of tax authorities around the world seek to facilitate free flow of information among states.
The latest in this line are European Union tax authorities who have gained the right to access data collected by other states under anti-money laundering legislation, following the entry into force of new rules on January 1.
Under the Directive on Administrative Cooperation, authorities with anti-money laundering responsibilities in any EU member state will be required to automatically share certain information.
Pierre Moscovici, EU Tax Commissioner said “We want to give tax authorities crucial information on the individuals behind any company or trust. This is essential for them to be able to identify and clamp down on tax evaders. To do this, tax authorities will now have access to anti-money laundering information.”
This will mean that national tax authorities will obtain direct access to information on the beneficial owners of companies, trusts, and other entities, along with information on bank account balances, interest income, and dividends. They will also have access to the customer due diligence records kept by companies.
In November 2017, Global Forum on transparency officials came to Nigeria an Automatic Exchange of Information implementation seminar to enable Nigeria to kick off the AEOI implementation process. Nigeria has committed to starting automatic information exchanges in accordance with the international standard for AEOI.
According to PwC, a professional global consulting firm, automatic information exchange has only recently gained global acceptance. Here, countries agree to automatically exchange information periodically. They agree on the specific information to be exchanged, the time of the exchange, and the format of the exchange.
“If you have been following the news you have probably heard about Country by Country Reporting (CbyCR) and the Common Reporting Standard (CRS) Agreements. These are examples of automatic information exchange agreements” a PwC report stated.
For a tax authority to be able to exchange information with another tax authority there must be legislation that allows it to do so.
Other than domestic laws, the primary instruments used for information exchange include: Double Tax Treaties (DTAs), Tax information Exchange Agreements (TIEA), and the Multilateral Convention for Mutual Administrative Assistance in Tax Matters (The Convention).
Although DTAs are agreements between two countries for the purpose of preventing double taxation, most DTAs contain an article that allows the treaty partners to exchange taxpayer information. TIEA’s on the other hand are bilateral agreements that have information exchange as the only subject.
The Convention is a multilateral agreement that allows a country the right to (amongst other things) exchange and receive information from many other countries without having to negotiate individual TIEAs or DTAs with each one of them.
STEPHEN ONYEKWELU
