Customer Care No.

91-1145562222

Role of Tax Information

Exchange Agreements in
Curbing Tax Evasion and
Avoidance
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Introduction
Over a long time, the relationship between the activation of
financial resources for development and international tax
cooperation have featured prominently in the outcomes of
various reports of the bodies working at the international level
to coordinate and harmonize the efforts of various countries to
eliminate tax evasion and avoidance en masse. Tax treaties
play a very crucial role in the context of international
cooperation in tax matters. On the one hand, they encourage
global investment and consequently, global economic growth
by reducing or eliminating international double taxation over
cross-border income, and on the other hand these treaties go a
long way in enhancing cooperation among tax administrations,
in dealing with international tax evasion. A Tax Information
Exchange Agreement (TIEAs) allows for the free trade of
financial tax information irrespective of differences in either a
country's requirement or meaning of a predicate crime to tax
evasion and money laundering. Often, conflict may arise among
countries when a particular country must access information
Customer Care No. 91-11that may be held by a foreign legal system, for the enforcement

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The Organization for Economic Cooperation and Development (OECD) has established various
standards on transparency and exchange of information for tax purposes and it strongly
encourages countries to adopt these standards in their dealing with each other on such
matters. The OECD and the Financial Action Task Force, members of which are the G-20
countries, have stated that a country must have at least twelve TIEA's in order to be regarded
as co-operating in matters of tax information exchange transparency. The jurisdictions which
fail to achieve this target are regarded as non-cooperative jurisdictions. These exchange
agreements are intended to permit full exchange of information oncriminal and civil
taxmatters between the two signatories. The present study looks into the detailed aspects of
tax information exchange among countries and its various general and legal facets.
Taxes have been rightly called the building block of civilization. International Taxation refers to
the tax treatment of international transactions. Since all countries have their own tax rules and
the rules of one nation are rarely perfectly consistent with those of another, it is possible that
income will be taxed more than once in the hands of the same recipient, which is sometimes
referred to as double taxation, or that it will go untaxed by any jurisdiction. Both efficiency and
natural concept of fairness dictates that all those who benefit from the services provided by
the government, should help to pay for it.
Customer Care No. 91-11-

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The resolution of this issue is the main purpose of international tax agreements (ITA), which
seek to set out detailed allocation rules for different categories of income. On one hand,
international tax agreements deal mainly with the elimination of double taxation, on the
other hand, they also serve other purposes like the provision of non-discriminatory rules, the
prevention of tax evasion, arbitration and conflict resolution. The blurring boundaries of
countries, including increasing inter national investment and trade, has increased the
chances of conflict between tax jurisdictions. At the center of jurisdictional conflicts lies the
issue of the jurisdiction to tax.
There are no restrictions however, under international law to a legislative jurisdiction to
impose and collect taxes. In most of the countries, the jurisdiction of imposing and charging
tax is based on the internal legislative process, which is an expression of national
sovereignty. Countries apply their jurisdiction to tax, based on varying combinations of
source and residence principles. This, together with the inherent differences in definition,
accounting principles and practices, and income recognition rules, may result in double
taxation in the hands of the same entity or, in some cases, in a jurisdictional vacuum. The
most important issue lying beneath all international tax considerations is how the revenue
which is collected from taxes imposed on income earned by the entities of a transnational
corporate
system
is allocated among different countries.
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