4.23 Transparency, Statistics and Information Reporting

Primary Reference to Article 15 – Tax Administration Generally

We are living in a period of change as we adapt to the digital world and the effects are being felt nowhere more strongly than in the field of taxation. For governments and revenue administrations the ability to garner huge amounts of data opens the door to the possibility of seeing the tax affairs of all taxpayers clearly and transparently.

Of course this is wholly tempered by a requirement to be able to handle "big data" which, so far, has not been seen in many countries and unfortunately requires establishment of clear, disciplined procedures and categorisation, itself a consumer of vast resource.

There is a wide gulf between tax data and tax information. Properly marshalled data is capable of producing highly significant information which can be converted to meaningful statistics for business and governments alike. Absence of any system, though, means inept supply of data with little or no benefit. Because we can collect data does not mean that we should. In fact it means we should not unless doing so provides access to information and statistics for all to use.

Current political pressures are driving the demand for action against practices of tax avoidance which are seen as abusive. Tax authorities are embattled against fraudsters illegally using systems set up to raise taxes. In both cases large round number figures are quoted as to taxes avoided or evaded with little real foundation in fact.

Investment in qualitative data management, shared experience and globally established system standards is essential if we are to see a realistic prospect of transparency in tax reporting, reliable statistics and effective cross border cooperation to deal with the severe fractures currently within the systems.

There are signs of development in some countries. Portugal has to be credited with having an entirely digital tax system which uses a carrot and stick approach to compliance – each month a lottery to win an Audi car based upon a correct compliance document filed that month. Since its introduction not only compliance but also revenues have risen substantially. In the UK, the annual income tax return is to be scrapped with relevant data collected directly from source.

Perhaps the greatest development in this area is the OECD led BEPS programme on cross border issues which has seen vast numbers of tax officials, tax advisors and business executives working collectively to deal with the manifest failure of the international tax system to address the new digital age, with symptoms characterised by arguably inappropriate allocation of taxing powers leading to significant tax savings. The BEPS project has the clear backing of the G20 so there is political support which could see it through, though some of the detailed effects may become obstacles as and when they are clear.

An antecedent of the BEPS project was the creation of the Global Forum on Transparency and Exchange of Information for Tax Purposes (Global Forum) again under the aegis of the OECD. This body has been active for some time and its actions are one of the key foundations for achievement of outcomes from the BEPS process and the development of assessment procedures for countries and their level of compliance.

At the time of writing there are 126 country members. There is a steering group which will look at future activities of the Forum and a peer review group whose objectives are:

"... to carry out an in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes, the Global Forum agreed on the setting up of a Peer Review Group (PRG) to develop the methodology and detailed terms of reference for a robust, transparent and accelerated process..."

This group has been meeting and evaluating countries for their levels of compliance. It is particularly concerned with tax havens, with countries with favourable tax regimes, and with countries which adhere to privacy rules which run counter to the needs of cross border exchange of information. The work it is doing is proceeding quickly and, in due course, one additional activity may well be the introduction of comparative tax statistics based upon disclosures made under the automatic provisions and country by country reporting.

Even before the GTF, some countries maintained and published tax statistics in considerable detail whilst others chose to publish little or no detail. Publishing such information contributes greatly to the knowledge that the tax system is fair and equitable, and that government is accountable to taxpayers from whom the tax is raised. The process of disclosure is intended to lead to transparency and, in due course, an ability to use global tax statistics to evaluate the comparative fairness and effectiveness of each and every state. Whether this will be effective only time will tell. Ultimately it is our hope that benchmarks can be set on an international level, and that these will be capable of maintaining standards of tax statistics which will inform and preserve global fiscal fairness and comparability.

In particular, we are concerned that all developments are made with a clear and unequivocal commitment to the principles set down in this Charter, both for the preservation of Taxpayer Rights and adherence to the corresponding responsibilities. All parties, tax administrations, taxpayers, governments and interested NGOs have a prime duty to uphold this commitment because it lies at the heart of efficient and non-exploitative development and ensures that future systems will not have at their heart provisions which run counter to commerce, enterprise or the quiet enjoyment of one's assets.