Abstract
In the last ten years, governments have initiated several reforms to automatically exchange bulk taxpayer information with other governments (mainly via the Foreign Account Tax Compliance Act, the Common Reporting Standard and Country-by-Country Reporting). This enhanced sharing of tax information has been encouraged by technology change, including digitization, big data, and data analytics, and political trends, including government efforts to reduce offshore tax evasion and aggressive international tax avoidance. In some cases, however, legal protections for taxpayer privacy and other interests are insufficiently robust for this emerging international framework to share big tax data. Conceptually, taxpayers should be seen as ‘data subjects’ with rights proactively protected by data protection laws and policies, including fair information practices. An optimal regime balancing the interests between taxpayers and tax authorities should include a multilateral taxpayer bill of rights, a cross-border withholding tax in lieu of information exchange, and a global financial registry to allow governments to identify the beneficial owners of business and legal entities.
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Notes
- 1.
A revised version of this chapter will be published by the Canadian Tax Journal. For instance, under Canadian tax law, a double dip cross-border financing structure, with the use of a tax haven-based financing affiliate, has been enabled by a recharacterization provision within section 95(2)(a)(ii) of the Income Tax Act since the 1970s.
- 2.
See I.R.C. section 61(a) (“gross income means all income from whatever source derived”).
- 3.
The initial legislation, entitled the Foreign Account Tax Compliance Act (FATCA), was not enacted. See H.R. 3933, 111th Cong. (1rst Sess. 2009). The legislation was subsequently passed within a large omnibus legislative package that was mainly directed at job creation. See Hiring Incentives to Restore Employment Act, Pub. L. No. 111-147, par. 501, 124 Stat. 71 (2010). The provisions to implement FATCA are now contained in sections 1471 to 1474 of the Internal Revenue Code (Sup. 2011).
- 4.
See OECD (2014a).
- 5.
- 6.
The OECD has explicitly stated that any information transferred under CbCR should ensure that there is no public disclosure of “confidential information (trade secrets, scientific secrets, etc.) and other commercially sensitive information.” See OECD (2014a), para 44.
- 7.
I.R.C. Section 7213 (providing for criminal penalties for unauthorized disclosure of taxpayer information by federal employees).
- 8.
R v Dyment, [1988] 2 SCR 417; R v O’Connor, [1995] 4 SCR 41; R v Mills, [1999] 3 SCR 668.
- 9.
Baker and Pistone (2016), describing the impact of ‘European law’, including the European Convention on Human Rights); Endresen (2017) discussing how the Convention does not normally apply to substantive tax issues, which is appropriate given the national sovereignty concerns). But see Sommer v. Germany (April 27, 2017, no. 73607/13) (ECHR), holding that German government search of a lawyer’s financial information records violated Article 8 of the Convention.
- 10.
United Nations General Assembly, Universal Declaration of Human Rights (Gen. Ass. Resolution 217A, Dec. 10, 1948). In December 2013, the United Nations General Assembly adopted resolution 68/167, which expressed concern at the negative impact that surveillance and interception of communications may have on human rights. While the resolution focused on mass surveillance techniques, it would also apply to the possible misuse of bulk tax information exchanged across borders.
- 11.
See OECD (2015).
- 12.
For a comprehensive review, see Debelva and Mosquera (2017, 377), advocating a multilateral agreement for privacy and confidentiality; Irma Mosquera et al. (2017), Baker and Pistone (2016), discussing how the rules of certain surveyed countries do not sufficiently protect the right to confidentiality and privacy; De Flora (2017, 448–450, 458), advocating for “a clear and common set of rules”); and Diepvens and Debelva (2015).
- 13.
Under this agreement, the United States provided the EU with binding assurances that the access by U.S. government authorities of transferred personal information for national security purposes will be subject to clear limitations, safeguards and oversight mechanisms. In addition, EU citizens are offered a mechanism to seek redress if their rights appear to be violated and an annual joint review will monitor the implementation of the commitments. See European Commission (2016, 9–19).
- 14.
The European Union abandoned this approach to join the Common Reporting Standard initiative.
- 15.
Access to the registry should, however, be limited to countries/governments that meet certain, still to be defined, international standards of protection of human rights, private property, taxpayer rights, and judicial overview by independent (tax) courts to protect taxpayers against potential arbitrary taxation and unethical confiscation. In other words, access to the global registry should be limited to those governments that have signed onto the previously-discussed multilateral taxpayer bill of rights.
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Cockfield, A.J. (2020). Cross-Border Big Data Flows and Taxpayer Privacy. In: van Brederode, R. (eds) Ethics and Taxation. Springer, Singapore. https://doi.org/10.1007/978-981-15-0089-3_15
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