Exchange of Information for Tax Purposes

1. S. 347Introduction

If a person or entity resident in one jurisdiction owns income-generating assets in another jurisdiction, the resident’s tax authorities generally need to know about assets or income to assess the tax claims. For this reason, jurisdictions exchange information with each other for tax (and other) purposes.

However, the globalization and liberalization of economic activity resulting in the exponential increase in cross-border commercial and financial transactions has created major problems for national tax authorities:

‘The past decades have witnessed an unprecedented liberalization and globalization of national economies. An increasing number of countries have removed or limited controls on foreign investment and relaxed or eliminated foreign exchange controls. While tax administrations remain confined to their respective jurisdictions taxpayers operate globally. This imbalance and the differences in national tax systems led OECD to address harmful tax practices by focusing on improved transparency and co-operation between tax authorities.’

The calls for greater international tax cooperation consider enhanced exchange of information in cross-border situations in complia...