Exchange of Information for Tax Purposes

1. S. 37Introduction

In the Report released in 1998, the OECD identified the phenomena of tax havens and preferential tax regimes. Both tax havens and preferential tax regimes have similar obstacles: inter alia, lack of information and lack of transparency. Regarding the lack of information, the taxpayer can avoid taxes and the tax authority has no capability to enforce the domestic tax law if the taxpayers‘ activities expand outside national borders. Lack of transparency factors exist when there are secret rulings, negotiated tax rates, and failure to apply the law. Lack of transparency also exists if there are inadequate regulatory provisions or if the government does not have legal access to financial records. For those reasons, single-country actions are not sufficient to eliminate those phenomena. Taxpayers seeking to avoid such actions could easily do this by moving to other countries that do not strongly combat such regimes. Therefore, a multilateral approach is required and the OECD is the most appropriate forum to perform this task.

In response to the above problem, the OECD initiated the establishment of the Global Forum on Transparency and Exchange of Information for Tax Purpos...