6.8 Tax information exchange agreements (TIEAS)

Tax Information Exchange Agreements (TIEAs) are bilateral or multilateral agreements between countries that facilitate the exchange of tax-related information. These agreements are designed to enhance international cooperation in combating tax evasion and promoting transparency in cross-border financial transactions. TIEAs enable tax authorities to request and share information with their counterparts in other countries to ensure that taxpayers are fulfilling their tax obligations. Here are key aspects of Tax Information Exchange Agreements:

Purpose and Objectives: The primary purpose of TIEAs is to provide a legal framework for the exchange of information between countries’ tax authorities to:

1. Prevent Tax Evasion: TIEAs help prevent individuals and businesses from hiding income or assets in foreign jurisdictions to evade taxes.
2. Facilitate Tax Compliance: By exchanging information about financial transactions and accounts, tax authorities can verify taxpayers’ compliance with tax laws.
3. Combat Money Laundering: TIEAs also assist in combating money laundering and other financial crimes by sharing information about suspicious financial activities.

Key Elements of TIEAs:

1. Scope of Information: TIEAs outline the types of information that can be exchanged, including details about bank accounts, financial transactions, ownership of assets, and more.
2. Confidentiality and Use of Information: TIEAs often include provisions to ensure that exchanged information is treated confidentially and used only for tax-related purposes.
3. Requesting and Providing Information: TIEAs specify the procedures for requesting and providing information. The requesting country’s tax authority typically submits a formal request for information, and the requested country’s tax authority responds with the relevant details.
4. No Harm Clause: Some TIEAs include a “no harm” clause, which ensures that the provision of information doesn’t have a negative impact on the requested country’s own taxpayers or financial institutions.
5. Timeframes and Deadlines: TIEAs may establish timeframes for responding to information requests and provide a mechanism for extending deadlines if necessary.

Implementation and Global Initiatives:

1. OECD Standards: The Organisation for Economic Co-operation and Development (OECD) has developed international standards for the exchange of tax information, which serve as a basis for TIEAs.
2. Global Forum on Transparency and Exchange of Information for Tax Purposes: The Global Forum, established by the OECD, assesses countries’ implementation of international standards for exchange of information and provides a platform for peer reviews and cooperation.
3. Automatic Exchange of Information (AEOI): In addition to traditional TIEAs, many countries are adopting the AEOI approach, where financial institutions automatically report certain financial account information to tax authorities, which is then shared with other jurisdictions.