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How information exchange will benefit taxpayers

Taxpayers will have to put up with an increased compliance burden as global efforts to improve information exchange grow, but the benefits are just around the corner, say international specialists.

Panellists in yesterday’s International Information Sharing: Treaties, TIEAs, and Joint Audits session at the Tax Executives Institute’s annual conference in San Franciscoexplained that joint efforts to enhance sharing of tax information should not be seen as a negative for taxpayers.

“There is going to be an increase in compliance as authorities get used to swapping information but once this becomes the norm, then it will generate a great deal of benefits over time for companies and tax authorities,” said Terrance McAuley, assistant commissioner, compliance programs, Canada Revenue Agency.

The panel concluded that the main benefit would be the removal of unnecessary tax investigations.

And with organisations such as the OECD, European Commission, the countries of the Joint International Tax Shelter Information Centre and national tax administrations all working together, the panel explained that with increased information exchange, officials would be able to use their time better and only target companies that are violating tax laws.

“There is a suspicion among revenue departments that every business move is done for tax purposes,” said Mary Bennett, Baker & McKenzie, Washington, DC, who has just stepped down as head of the OECD’s tax treaties and transfer pricing unit. “But if tax authorities share more information then they will soon realise that all is above board and so there is no need to bother taxpayers.”

Judith Knott, director of business taxes at HM Revenue and Customs in the UK, said the amount of commitment shown by governments and tax authorities is something to be proud of.

“With information exchange being high on the agenda of tax authorities around the world, this is forcing interested parties to come up with innovative ways to improve information exchange,” said Knott.

However, Knott did warn that it might be a little while before the benefits to taxpayers become obvious.

“Tax authorities are under pressure to do more with fewer resources so we find it hard to dedicate time and effort into this but it is definitely something we will soon be dedicating more resources too,” said Knott.

The panel raised the issue of confidentiality of exchanging tax information.

“The key thing for any tax department is maintaining confidentiality,” said McAuley. “We focus on the destination of the tax information, this is a big thing for us. Taxpayers should be secure in knowing that privacy is key when swapping information.”

This news comes as the OECD confirmed last week that international efforts to clamp down on tax evasion have drawn in €14 billion ($19 billion) from would-be tax evaders.

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