Taxpayers' confidentiality and privacy rights in the international exchange of tax information

Abstract

The exchange of tax information is a distinctive feature of international tax cooperation processes. The trend of intensive communication between the national tax administrations has been a political priority in economically developed countries. This area of international tax law has been subject to significant changes in the past few years. Countries are prompted to pursue the automatic exchange of tax information by entering into multilateral treaties on the exchange of tax information rather than engage in international exchange of tax information upon request by entering into bilateral agreements. These processes are promptly expedited owing to the incredible development of information and communication technologies. These developments are basically aimed at preventing different forms of international tax fraud which generate significant financial losses in the circumstances of current economic crisis. Such efforts may be justifiable regarding the interests of the countries of residence; but, what about the legal status of ordinary taxpayers who are now subject to a comprehensive and far-reaching control? The new concept may be appropriate for tracking tax fraud or embezzlement but what are its implications for law-abiding taxpayers? The national legislatures are obliged to provide for the protection of confidentiality of exchanged tax information but many states have not fully recognized the importance of providing adequate legal protection of sensitive personal and financial data. There are only a few countries whose legislations explicitly prescribe the taxpayers' right to be informed, the right to consult tax administration and the right to seek tax administration intervention as a form of legal protection in international exchange of tax information. The Serbian tax legislation does not envisage the obligation of tax authorities to notify the taxpayers about the request submitted by foreign tax authorities to provide some tax information. The OECD standards on the international exchange of tax information are given in the form of soft law. As they are endorsed by the G20 and the European Union, the member states are obliged to incorporate them into the national legislations as binding rules on international tax cooperation. However, the boundaries of international public (tax) law are radically changing in light of the requirements for fiscal transparency and subrogation of the confidentiality of information in banking transactions.

Keywords

• international tax cooperation
• automatic exchange of tax information
• confidentiality of tax information