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Transparency promotes sustainable tax systems

Each country’s tax authorities need information about people and enterprises to be able to apply the correct tax rate. The authorities need to know who the real owners are, where the assets are and how large they are.

(Image top: From one of the tax seminars in Colombia. From the left: Natalia Quiñiones, Colombia; Pasquale Pistone, a local panel leader (not part of the project); Frederik Zimmer; Luis Schoueri, Brazil; Addy Mazz, Uruguay.)

In recent years, a number of treaties have been signed concerning the exchange of such information, often referred to as information exchange agreements. OECD has been and continues to be an important driving force in this work. OECD is an organisation for industrialised countries, however, and that raises the question of whether the information exchange agreements are adapted to the situation in developing countries. How are countries with poorly developed tax systems and, perhaps, also big corruption problems to obtain such information when other countries ask for it? What will developing countries gain from getting this information from other countries? 

The research project Sustainable tax governance in developing countries through global tax transparency aims to shed light on such questions. Professor Frederik Zimmer of the Department of Public and International Law at the University of Oslo is project manager and head of the research group in Oslo. Professor Pasquale Pistone, an internationally recognised shcolarscholar, is in charge of the project’s Vienna group. He is currently Academic Director of the International Bureau of Fiscal Documentation (IBFD) and visiting professor at the Vienna University of Economics and Business.

 

Antennas in the South

The project is currently focusing on four countries in South America and Africa, where it collaborates with researchers and universities. Brazil and South Africa were chosen because they have the strongest economies and the best developed tax regimes in their respective continents. Colombia represents a country that wants to meet international standards, but has limited resources to ensure effective interaction on tax information. Uruguay is an example of a country that has difficulty meeting the OECD standards. The project also wanted to include very poor countries, but that proved to be difficult.

‘The international agreements are written from a top-down perspective and primarily focus on the needs of industrialised countries. Our research colleagues in the South play a central role in highlighting the individual countries’ needs. They are the project’s “antennas”,’ says Zimmer.


Tax seminars

The project started in 2012 and will run until 2016. Each year, several seminars are held in each participating country in the South, where researchers, private tax lawyers and tax administration staff get together to discuss specific topics relating to the country in question. Questionnaire surveys developed in Vienna and Oslo form the basis for the seminars. The answers respondents submit after the seminars form the basis for assessing how the exchange of information works for looking at differences and similarities between the countries, which, in turn, can contribute to a transfer of experiences. Impressions and results from all the seminars are gathered and used as the basis for further research.

‘We have already raised topics that we did not predict, topics that are not so relevant in the Norwegian context, but that mean a great deal to countries in the South,’ says Zimmer, referring to a seminar in Colombia where questions relating to due legal protection were on the agenda.

‘Are individuals and companies entitled to be notified when their countries plan to disclose information to another country? And can they appeal such a decision? That can be of substantial importance if, for example, there is disagreement about information relating to trade secrets. There may also be reason to doubt whether the tax authorities of the recipient state are capable of complying with confidentiality policies,’ says Zimmer.

Paid access?

In Norway and many other Western countries, the tax authorities can easily gain access to extensive information about individual companies and taxpayers from central data registers. Passing on such information requires little effort. Many developing countries have less developed registers, and obtaining tax information can be much more demanding. One important question is how far a country is obliged to exchange tax information.

The question is particularly relevant for countries that receive far more requests from other countries than it sends itself. To what extent should industrialised countries pay the costs of the developing countries for such services?’ asks Zimmer.

 


It has even been suggested that a developing country should receive part of the tax revenues that the industrialised country receives on the basis of the information provided by the developing country.

The information collected in the four collaborating countries is intended to provide an empirical basis for a critical assessment of the information exchange agreements based on OECD’s work.

‘One of the goals is to identify a set of best practices for tax authorities in developing countries,’ says Zimmer.

 

Transparency

The researchers hope that the project will contribute to developing sustainable tax regimes that, in turn, can prevent capital flight from developing countries.

‘Transparency between the different countries’ tax authorities is a precondition for sharing good, correct tax information across national borders. In a long-term perspective, it can also contribute to developing good systems that, in turn, can promote tax compliance and make tax collection in developing countries more effective,’ says Zimmer.


Facts about the project


Project: Sustainable tax governance in developing countries through global tax transparency
Project period: 2012-2016
Project leader: UiO, Frederik Zimmer
Contact information: frederik.zimmer@jus.uio.no 
Project homepage: http://www.jus.uio.no/ior/english/research/projects/global-tax-tranparency/

 

Associated companies:


 

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