4.22 Privacy and Confidentiality

Primary Reference to Article 14 – Privacy and Confidentiality

Most would agree that taxpayers do not like paying tax but rather accept it as a necessary fact of life. There are those though with a view of the economic environment which reflects their strong belief in the rights of the individual against the state and in particular that earnings, profits and property are private and theirs alone. Such is political diversity.

Our view is that whilst the balance is somewhere between, the need to have society recognise property ownership, to measure earnings, profits and income in currency and to ensure the right to a quiet enjoyment of property prevents an individual from denying any state the right to access their privacy. The question is by what degree should that be?

Does the state have an absolute right to access all a taxpayer's information and to do so without recourse? Does a taxpayer have a duty to make full and complete disclosures to tax authorities, especially to those in countries where they are not resident? Must they answer all questions asked of them without any right of protest or reserve?

Answers to those and similar questions are tempered by political sentiment and where one sits on that imaginary divide. One thing is clear. Regardless of political persuasion no taxpayer would ordinarily accept that information supplied by or extracted from him/her by a tax authority should be made available to any other person or agency without permission, or a very valid reason.

Our concern for the issue of confidentiality and the protection of taxpayer privacy extends beyond the mischief that can be caused by the leaking of data howsoever obtained, serious though that is. Families often wish to keep details of wealth, earnings, and pecuniary responsibilities private for many diverse, legitimate reasons none of which need justification, but violation of which could have major personal and far reaching consequences.

Confidentiality is sacrosanct whether or not privacy has been breached. Even if a state adheres to a level of transparency which equals public disclosure of detailed tax information, we are of the view that individual privacy must be preserved and disclosure made only in such a way that the taxpayer cannot be identified.

Privacy and the right to quiet enjoyment of property are at the core of human rights. Any violation of those rights is a serious threat to the balance and stability required between the taxpayer and taxing authority. These are rights which exist whether or not there is a Taxpayer Charter.  If included within a Taxpayer Charter, it should be by way of recital and reaffirmation of the rights of privacy and confidentiality. They exist as of right and as with other fundamental rights a Charter does not create them but merely recognises them (or fails to do so).

The inclusion of the rights of privacy and confidentiality within a Taxpayer Charter enables a clear agreement to be set down of what is expected from taxpayers in respect of disclosure and from tax administrations on the limits of their powers. Even without a Charter, taxpayer duties are enshrined in laws which carry penalties for breach. This is not the case for a government department which pushes its boundaries and by so doing exceeds its authority. In some countries, judicial review is possible but it is a long and expensive process not readily accessible to most taxpayers.

By agreeing to include sensible parameters for observance by tax authorities, specifically designed to establish boundaries to the scope of revenue powers, restrictions which are subject to quick and easily accessed legal enforcement, sovereign states can give taxpayers real and meaningful access to rights which they already have but which, without a Taxpayer Charter, are very difficult to safeguard in practice.

If properly drafted, charter clauses on privacy and confidentiality can provide a strong and efficient framework on which to build the co-operative edifice of taxpayer/tax administration relations necessary to improve and advance tax systems throughout the world.

One last but very important matter arises from the introduction of cross border co-operation and the provisions for exchange of information between tax authorities either on request or, more likely, on the basis of automated procedures. It is our strongly held view that an essential concomitant of all exchange agreements must be specific and seriously uphold undertakings to observe the confidentiality of the information supplied. It is also our view that a simple and readily accessible procedure be set in place for taxpayers and/or their advisors to challenge or correct any such information if it is wrong or in error, and contest the provision of information where there is reason to believe that such undertakings will not be honoured or the information provided will be misused in other ways.