The first three segments in this series on the Multinational Convention on Mutual Administrative Assistance in Tax Matters (the “Convention“) focus on the abilities states party to the Convention enjoy. This includes the ability to exchange information and cooperate in tax examinations in an effort curb individual, corporate, and industry-wide incidences of tax avoidance and evasion. This post, the fourth and last of the series, addresses the limitations of these exchanges-limitations intended to ensure that the methods discussed are not used for unauthorized purposes and that taxpayer rights, trade secrets, and secrecy rules are protected.
Under the Convention, taxpayers have certain rights. In particular, taxpayers have the right to privacy and the right for proper procedures to be utilized. The following are grounds that can be claimed by a responding country to decline tax information requested by a requesting country:
- Tax secrecy – where domestic law sets forth provisions designed to ensure that certain information remains confidential
- Reciprocity – if the requesting country would be unable to obtain the tax information under its own laws
- Public Policy – where the vital interests of a country are concerned or where the tax investigation in the applicant country is motivated by racial or political persecution
- Trade and Business Secrets – a requested country has no obligation to supply information to a requesting country that would disclose trade, business, commercial or professional trade secrets (commentaries indicate that this should not be interpreted too broadly)
- Privilege – confidential information between a client and his attorney need not be revealed, unless, for example, the information was transferred to the legal representative only in an effort to protect it from disclosure
Note: Bank secrecy, agent/fiduciary relationships and domestic tax interests cannot be used as grounds to decline a request for information.
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