Various Agreements Between States Covering EOI

1. Various Agreements Between States Covering EOI ATAF Conference Kampala, Uganda 19/20 April 2012 Ron van der Merwe

2. Types of Agreements • Double Taxation Agreements • Tax Information Exchange Agreements • Mutual Assistance Agreements • Multilateral Assistance Agreements • First three are bilateral but can also be negotiated by way of a multi-party process.

3. Basic Principles • Creates a legal basis for the exchange of information between States. • Sets the standard of foreseeable relevance in relation to requests. • Sets standards of confidentiality. • Ensures that bank secrecy and lack of domestic tax interest cannot be used as a barrier to exchanges.

4. Basic Principles No obligation to exchange: • If contrary to administrative laws and practices of either State • Information not obtainable under laws or normal administration of either State • Trade secrets • Information injurious to State

5. Double Taxation Agreements • Article dealing with EOI is virtually the same in both the OECD and UN Models. • Also adopted in regional models such as the SADC Model and the proposed COMESA Model. • Scope of exchange includes: • Request • Spontaneous • Automatic • Simultaneous Examinations • Industry wide exchanges

6. Double Taxation Agreements • Current Models extend EOI to taxes of every kind and description. • Older treaties might limit EOI to taxes covered by the treaty. • DTA also has the possibility of including an Article allowing assistance in collection – this is a potential issue of great benefit to developing countries.

7. Tax Information Exchange Agreements • Model created by the OECD and endorsed by the Global Forum on Transparency and Exchange of Information. • Membership in excess of 100 countries. • TIEAs create a legal basis for EOI when there is no need for a DTA between States due to low levels of cross border activity. • Members obliged to enter into TIEAs if requested by another Member.

8. Tax Information Exchange Agreements • Scope of EOI is limited under a TIEA in comparison to a DTA. • EOI may only be done on request. • Taxes covered may be limited. • No assistance in collection included. • Start of a process which hopefully will be extended in future to include all possible exchanges??

9. Tax Information Exchange Agreements • TIEAs can also be negotiated on a multi-party basis. • Two multi-party negotiations have already been successfully carried out under the auspices of SADC. • Result being 6 TIEAs between SADC Members and Guernsey and 7 TIEAs between the Isle of Man and SADC Members. • Multi-party negotiations for ATAF Members are recommended by the Working group and endorsed by the ATAF Council.

10. Multilateral Assistance Agreement • ATAF Council has endorsed the possibility of a Multilateral Assistance Agreement between ATAF Member States. • It is not meant to be a substitute for DTAs when economic relations between any two States would normally require a DTA. • The advantage lies in the fact that such a multilateral could be easily agreed and acceded to by States whereas a DTA which deals with taxing rights takes longer to negotiate and bring into operation.

11. Multilateral Assistance Agreement • Model drafted by ATAF Working Group to be presented to Member States for comment. • Process to achieve consensus on the text would require either a round table meeting or a written procedure. • Probably the best solution is a round table discussion with delegates from Member States who are authorised to take relevant decisions. • Scope is in line with a DTA rather than the limited TIEA.

12. Multilateral Assistance Agreement • Summary of Articles. • Article 1 Definitions and rule for undefined terms. • Article 2 Object of Agreement – full EOI, simultaneous examinations, tax examinations abroad and assistance in collection. • Article 3 Taxes covered – all taxes on income, capital and taxes on goods and services.

13. Multilateral Assistance Agreement • Article 4 EOI provision in line with OECD/UN Article. Confidentiality dealt with in separate Article. • Article 5 Tax examinations abroad – allows for visits to treaty partner in order to be present at tax examination. • Article 6 Simultaneous tax examination each in its own territory. • Article 7 Assistance in collection in line with OECD/UN Article and only in respect of taxes finally due and payable.

14. Multilateral Assistance Agreement • Article 8 Confidentiality and use in line with OECD/UN standard. • Article 9 Costs including provision for substantial or extraordinary costs. • Article 10 Implementation of legislation to enable compliance with the Agreement. • Article 11 Agreement does not limit, nor is it limited by, other international agreements.

15. Multilateral Assistance Agreement • Article 12 Mutual Agreement procedure relating to implementation and interpretation of the Agreement and procedures to be used in exchanges. Direct communication allowed and dispute resolution sanctioned under ATAF rules. • Article 13 Depositary – ATAF Executive Secretary. • Article 14 Notification of the Competent authority for each State. • Article 15 Ratification and entry into force. 5 Member States.

16. Multilateral Assistance Agreement • Article 16 Amendments. • Article 17 Accession by further Member States. • Article 18 Signature by duly authorised representatives. • Article 19 Withdrawal.

17. EOI • Finally, it should be noted that the multilateral looks at exchanges between Members – the process of entering into EOI agreements outside ATAF should be a priority. Much information will be sourced in countries outside ATAF and Africa. • Can you do an audit/transfer pricing investigation without information??