Given the worldwide media attention and increasing fiscal leakage due to tax evasion and or tax avoidance, the OECD and its member states, including Greece, have been very focused on global strategy to reduce the incidence of tax evasion and restore government revenue by preventing fiscal leakage. In particular, the OECD’s work in developing the Global Forum on Transparency and Exchange of Information, which Greece is also working vigorously towards, reflects a global attempt to bring Greece’s international tax rules into the 21st century.
As a result of the OECD’s work, numerous countries, including Greece and especially the G20, have been very keen to put into place effective strategies to overcome the fiscal losses caused by tax evasion.
While Greece has a number of Double Tax Agreements and Exchange of Information Agreements in place, it is suggested they are not able to provide a comprehensive strategy for Greek tax authorities to address the issue of offshore tax evasion and or tax avoidance due to tax secrecy, confidentiality and privacy laws.
In order to potentially overcome these types of problems, Greece’s taxing authorities, including its finance ministry, should look at entering into multilateral agreements. The reasons for this are:
a) Unless there are multi-lateral agreements in place, the Greek authorities and other authorities are unable to identify and trace arrangements which involve a number of related countries;
b) There is also a need for such information to be targeted in a timely manner. If a request for information is made to a country where there is a Double Tax Agreement and TIEA there is the possibility that information can be relocated and transferred to another country which may not be a signatory to such agreements;
c) Related to the above is the need for the authorities to overcome the issue of bank secrecy. Unless this is overcome financial details related to tax evasion will be made much more difficult;
d) There is the need to be able to identify all the people (or entities) that may hold or have access to such information. In this respect overseas jurisdictions may not be able to gain access to information where there is legal protection such as professional privilege or the information is held by nominees acting in a fiduciary capacity. It is interesting to note that the TIEA with the Cook Islands addresses this issue by ensuring that the competent authority is given authority to obtain upon request information held by banks, financial institutions which is held either directly or by nominees;
e) If a country does not wish to enter into a Double Tax Agreement or TIEA there is no enforcement mechanism which can be used directly to encourage an agreement. Rather, other measures such as sanctions and financial restrictions may be seen as too punitive in nature. Alternatively, such countries may be seeking other financial or trade benefits which are too costly and lacking in comparability with other agreements currently in place;
f) There is an assumption that any exchange of information between countries is confidential. While this may be true in regard to most DTAAs and TIEAs there may be some countries where this cannot be guaranteed or where there may be some corruption involved. In this case the integrity and confidentiality cannot be guaranteed.
In regard to the issues raised above, it is interesting to note that on 3 November 2011, the OECD issued a news release as a result of the 2011 G20 meeting in Cannes. In the release it was stated that all G20 governments have agreed to sign a multilateral convention to tackle tax evasion, this also included Greece. In particular, it noted that the Multilateral Convention on Mutual Administrative Assistance in Tax Matters offers a wide range of tools for cross border tax cooperation. This includes exchange of information, multilateral simultaneous tax examinations and international assistance in the collection of tax due. (This convention was initially developed jointly by the Council of Europe and the OECD and opened for signature by the member states of both organisations on 25 January 1988.)
In closing, the use of tax havens is a growing international problem which has resulted in either tax evasion, abusive tax shelters, money laundering or tax avoidance. Furthermore, it has also fostered and led to many other illegal criminal activities. However, on the other hand tax havens have a very legitimate place to conduct business with other countries; there is nothing wrong or illegal in doing business in a tax haven.
While the issue of offshore requests notices may seem a useful means of obtaining relevant information relating to offshore dealings and tax havens, it is somewhat limited in its practical operation. Although income tax treaties have been utilised to prevent fiscal evasion, they have also been used to achieve anti-treaty shopping, and more importantly, the exchange of information between countries by the use of exchange of information. This is most relevant where transactions are carried out in designated tax havens.
In this respect, it is suggested that the primary goal for Greece and other tax jurisdictions should be the review of existing tax treaties to establish mechanisms which facilitates the exchange of information, by way of exchange of information agreements which would overcome the limitations of the banking secrecy laws of other countries. Furthermore, to prevent fiscal leakage it is necessary for Greece to seek new tax treaties with other countries, including, most importantly, with Australia.
It is not sufficient that Greece has in place a limited number of bi-lateral tax treaties which facilitate the exchange of information and overcome bank secrecy laws between two countries without a comprehensive list of multilateral agreements ideally in the future. What is needed is not a range of bi-lateral agreements between Greece and other countries, but rather, a multilateral system of agreements which fosters information exchanges within and between the countries concerned. In this respect, any non-inclusion of a tax haven country raises a considerable risk of leakage and fostering of tax haven activity and tax avoidance.
Therefore, it is suggested that Greece should develop a stringent tax treaty policy which includes anti-treaty shopping provisions and exchange of information between member countries and one of those member countries should also include Australia.
Finally, it is desirable that the move by Greece’s taxing authority is to develop tax treaties, and the exchange of information by TIEAs, that should ultimately be linked with the activities and direction of the OECD on anti-avoidance. This is necessary to facilitate an integrated and combined approach to the problem of the use of tax havens and tax evasion on a global scale.
*Tony Anamourlis is an international tax lawyer and tax academic and managing principal at Templeton Fox Rothschild.