ON THE RIGHT: A part of worldwide legal convergence

THE START OF THE implementation of the Foreign Account Tax Compliant Act on July 1, 2014, combined with the Organisation for Economic Cooperation and Development’s (OECD) adoption of the common reporting standard, the support by the European Union of the automatic exchange of information (AEI), and the strong support by the G20, have made AEI and all of its implications enormously important.

The United States (US) budgetary problems and politics ensure that the anti-tax haven bills will constantly be appended to appropriations legislation for the foreseeable future.

The lack of actual reciprocity by the US government, as opposed to the rhetoric, may well lead to dispute resolution on proceedings in the near future and to disagreements within the international initiatives of the OECD and Financial Action Task Force (FATF), as a result of the perceived lack of a level playing field, whereby each country is to abide by the same rules.

A trend in the US and globally is the use of migration controls and trade agreements for tax enforcement purposes. The US is using immigration on the Treasury Enforcement Compute System to detain for secondary inspection persons entering the US who owe significant amounts of tax to the US. A global trend towards criminalisation of tax compliance will continue.

International tax enforcement cooperation is converging with criminal law, money laundering, asset forfeiture, and international evidence gathering. The revised FATF recommendations (making tax crimes express predicates of money launder) and the Treasury Advance Notice of Proposed Rule Making on customer due diligence illustrate aspects of the convergence.

International organisations, such as the OECD, will continue their projects on the role of, and accountability for, banks and other financial intermediaries in tax compliance and enforcement, AEI, tax information exchange, and transparency. governments will privatise tax enforcement by deputising financial institutions and service providers with respect to reporting, ethics, and a range of other requirements. Criminal investigations and prosecutions of non-compliant institutions and service providers will continue. Convergence will increase between stronger enforcement cooperation and tax enforcement.

Hence, the OECD will continue to emphasise exchange of information in its tax transparency initiative. The FATF revised recommendations provide for strengthened enforcement cooperation obligations. In this regard, the convergence of tax enforcement, asset forfeiture, and money laundering is dynamic. As a result, I envision that there will be an increase in tax information exchange requests and litigation. As tax authorities increase their penalisation of cross border tax misconduct, including reporting violations and penalties for the same, increasingly taxpayers and tax authorities will focus on the ability of tax authorities to collect on the huge penalties and tax debts.

Individual and corporate taxpayers will move in order to escape Byzantine reporting and draconian penalties. Taxpayers will try to use national fundamental rights laws and international human rights provisions, to try to protect themselves against illegal evidence gathering, disproportionate penalties, and strict liability laws relating to alleged cross border tax crimes and reporting violations.