International tax cooperation: the focus is on sustainability and transparency
There are nine pillars of the draft United Nations Framework Convention, a draft of which was published at the end of July
Universality, tax sovereignty, respect for human rights, sustainable development, flexibility, fairness, simplicity of rules and certainty for governments and taxpayers, transparency. These are the nine pillars of the draft United Nations Framework Convention on international tax cooperation, a draft of which was published by the co-rapporteurs at the end of July.
Sustainable development and transparency
More specifically, sustainable development is broken down into three dimensions: economic, social and environmental, as specified in Article 4 of the draft. Equity, on the other hand, is expressed through the fair allocation of the right to tax amongst the various jurisdictions. It is, in fact, essential that taxation reflects the actual contribution of each jurisdiction and takes into account factors that may become relevant as business models evolve. States should also cooperate to avoid double taxation and non-taxation.
Cooperation, as set out in Article 6, is also essential for identifying and preventing tax avoidance and evasion by individuals with substantial wealth, known as ‘high-net-worth individuals’. For example, states are encouraged to share information regarding the methods used by the wealthy to evade and avoid tax. Article 7 also calls for cooperation in relation to illicit financial flows of a fiscal nature. Developing tools to detect and prevent these flows, exchanging information and providing mutual administrative assistance are some of the possible measures to ensure the effective taxation of income and profits derived from illicit financial flows.
With regard to potential harmful tax practices, Article 8 of the draft proposes the application of common principles and standards to enable their identification and discourage their use. The ultimate aim, in fact, is to enable all states to tax income in accordance with their own laws. Tax disputes, moreover, can be prevented and resolved through certain measures, such as the implementation of clear and accessible legislation, as well as interpretative guidelines on tax obligations. To facilitate tax administration and combat tax evasion and avoidance, Article 10 also emphasises the importance of cooperation, particularly from an administrative perspective.
The exchange of information and simultaneous tax audits are among the measures proposed in the draft. Article 11 specifies that information received from other Member States must be treated with the same confidentiality as information obtained under domestic law. However, information may not be requested if, for example, it would require a Member State to disclose a trade, industrial or professional secret. Conversely, the possibility of withholding information or data on the grounds that it is held by banks, financial institutions or an intermediary, or that it relates to beneficial ownership, is not permitted.
