08 April 2010

Tax: Revised OECD-Council of Europe treaty will boost multilateral cooperation

The OECD and the Council of Europe have agreed on an update to an international treaty that aims to help governments enforce their tax laws, as part of the worldwide drive to combat cross-border tax evasion.

The update takes the form of a protocol amending the Convention on Mutual Administrative Assistance in Tax Matters for which the two multilateral organisations are the custodians. Its effect is to align the convention to the international standard on information exchange for tax purposes by allowing for the exchange of bank information.

The Protocol will be opened for signature on the occasion of the OECD’s annual Ministerial Meeting in Paris on 27-28 May. This initiative responds to a call by G20 leaders at their April 2009 summit for proposals as to ways to help developing countries secure the benefits of the new cooperative tax environment. U.K. Prime Minister Gordon Brown, as chair of the G20, indicated that “it would be helpful, in this regard, if an effective multilateral mechanism could be developed”.

The original convention entered into force in 1995. It currently groups 14 countries -- Azerbaijan, Belgium, Denmark, Finland, France, Iceland, Italy, Netherlands, Norway, Poland, Sweden, United Kingdom, United States, and Ukraine – with Canada, Germany and Spain having signed it but not yet ratified it. Other OECD and Council of Europe members, including some that are G20 countries, are looking at becoming parties to the convention, and it is now being opened up to other countries that are not members of either the OECD or the Council of Europe members .

This will enable developing countries to become parties to the amended convention and benefit from the new, more transparent tax-cooperation environment. The protocol provides, among other things, for exchange of information, multilateral simultaneous tax examinations, service of documents and cross-border assistance in tax collection, while respecting national sovereignty and the rights of taxpayers and ensuring extensive safeguards to protect the confidentiality of the information exchanged.

OECD Secretary-General Angel Gurría and Council of Europe Secretary-General Thorbjørn Jagland welcomed the finalisation of the protocol by both organizations, noting that as more countries join, the benefits of the convention grow.

Given its multilateral nature, the Convention is a unique instrument to counteract international tax avoidance and evasion,” Angel Gurría commented. “The OECD and the Council of Europe have agreed to improve international cooperation to combat tax evasion and the standards set by the convention are being updated to reflect this new consensus.

New provisions aim to remove obstacles to effective co-operation and exchange of information, especially those related to bank secrecy legislations,” said Thorbjørn Jagland. “The amending protocol also provides for the opening of the convention to countries that are not members of the Council of Europe or the OECD, thereby transforming it into an instrument to fight tax evasion worldwide.

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