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Canada enhances international tax assistance

Canada is one step closer to enhanced tax cooperation and will soon be involved in simultaneous and international tax examinations, argues Carrie Aiken Bereti of Blake, Cassels & Graydon.

At the G20 summit earlier this month in Cannes, France, all G20 countries, including Canada represented by the Minister of Finance, participated in a ceremony to mark the signing of the protocol updating the Convention on Mutual Administrative Assistance in Tax Matters.

Other signatories include Belgium, Denmark, Finland, Georgia, Ireland, Iceland, Moldova, Netherlands, Norway, Poland, Portugal, Slovenia, Spain, Sweden and Ukraine. The protocol is the result of a joint project of the OECD and the Council of Europe.

The objective of the multilateral convention is to provide a stable framework for governments to combat tax avoidance and evasion by sharing tax information in accordance with the latest internationally-agreed standards as developed by the OECD.

It promotes international cooperation between tax authorities to improve the application of the domestic tax laws of the signatory countries. Canadian Minister of Finance, Jim Flaherty said of the multilateral convention:

“This updated international convention will help Canada and other countries combat cross-border tax evasion through enhanced information sharing. A secure tax base contributes significantly to a sound economy, which is more important than ever in these challenging economic times.”

The multilateral convention is an international agreement that covers all taxes other than custom duties and offers signatory countries a wide range of tools for cross-border tax co-operation.

t provides for three broad categories of administrative assistance: (i) exchange of information, including simultaneous tax examinations and participation in tax examinations abroad; (ii) assistance in recovery, including measures of conservancy; and (iii) service of documents.

The terms of the multilateral convention ensure that the exchange of tax information is no longer subject to limitations under certain countries' domestic laws or is not otherwise impeded by bank secrecy laws and requirements that a country needs to have a domestic interest in the tax information being requested to provide information.

The multilateral convention also imposes safeguards to protect the confidentiality of the information exchanged between signatory countries. In this regard, the multilateral convention provides that any information obtained by a state under the convention is protected in the same manner as information obtained under the domestic law of the member country and, to the extent needed to ensure the necessary level of protection of personal data, in accordance with the safeguards which may be specified by the country supplying the information as required under its domestic law.

The multilateral convention will come into force in Canada after it has been tabled and ratified in parliament.

Carrie Aiken Bereti (carrie.aikenbereti@blakes.com) of Blake, Cassels & Graydon, Calgary.

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