The Forum on Tax Administration (‘FTA’), comprising the heads of tax administrations from 45 economies, met in Moscow for the 8th meeting of the FTA. The final communiqué issued pursuant to the Moscow meeting indicated that the FTA is dedicated to securing high levels of voluntary tax compliance by providing excellent service and effectively addressing tax evasion and aggressive tax avoidance in all its forms, including the underground economy.
The communiqué indicated that the participating tax administrations are committed to undertaking action jointly to improve the effectiveness of tax administrations, address trans-national tax fraud, tax evasion and aggressive tax avoidance.
The Moscow communiqué pointed out that, where the tax administrations are detecting offshore evasion, they will share information with their partner countries. It was pointed out that tools have been developed to enhance the gathering of information and cross-border financial transfers, to understand banking transactions and to identify the beneficial owners of complex structures. Furthermore, Australia, the United Kingdom and the United States of America have secured significant data revealing complex offshore structures, which will be utilised by the revenue authorities in those countries to identify participants in tax evasion and take action against those persons where necessary. It would appear that the three countries concerned will share the information obtained by them to other members of the FTA in accordance with international agreements.
Over the last few years, the number of agreements allowing for the exchange of information between countries has increased, and this has facilitated the greater flow of tax information between states. The FTA has indicated that it will rely more and more on the provisions of the increased network of agreements, allowing for the exchange of information and, also, by providing necessary training to tax auditors to ensure the effective and secure use of information received under the various international agreements. It must be noted that the automatic exchange of information between states has increased, and that this will ultimately become the standard to which various countries will comply under international agreements.
The Moscow communiqué also referred to the OECD’s work on Base Erosion and Profit Shifting (‘BEPS’), which will initiate an action plan intended to modernise international tax instruments and standards to counter BEPS, particularly in the area of international taxation, transfer pricing and the digital economy, in an effective manner. Governments around the world are concerned about the erosion of their tax base and shifting of profits to lower tax jurisdictions, particularly in the current economic climate, which has created difficulties for tax authorities collecting sufficient tax for the various governments around the world.
In addition, the communiqué indicates that tax administrations must enhance their efficiency and offer their citizens and businesses quality service and support for voluntary compliance. It was pointed out that the effective management of tax debts, including tax debts that arise cross-border, is a key priority, and will be a particular focus of attention in the future.
When reference is made to the various initiatives underway, such as the OECD’s BEPS initiative, the work of the FTA and other organisations, it is important that businesses review the manner in which they conduct their tax affairs to ensure that they comply with their fiscal obligations in the various countries within which they operate.
All revenue administrations need also to take account of the rights which taxpayers have in their dealings with the revenue authority, and South African taxpayers can seek reliance on the Constitution of the Republic of South Africa, Act 108 of 1996, in ensuring that their rights are not violated by SARS. Various organisations have undertaken research into the design of a model taxpayers’ charter to prescribe levels of taxpayers’ rights to protect taxpayers in their dealings with tax administrations around the world.
It is important, taking account of the pressures facing revenue authorities to raise revenue in difficult economic times, that taxpayers’ rights are protected, and are not disregarded when collecting tax that the revenue authorities believe may be due.