Big Data, Automatic Exchange of Information and the Rights of Taxpayers
Abstract
In the last decade, a new form of exchange has been adopted—the automatic exchange of information (AEOI)—which is viewed as the new global standard. Never before has there been so much enthusiasm for tax administrations around the world to cooperate in the fight against tax evasion. In a very short amount of time, there has been a drastic move from the exchange of information (EOI) on request to spontaneous AEOI. The development of the Internet of Things (or IoT) has also brought about astounding changes to the way in which tax authorities around the world operate, and the use of big data by the tax administrations has come as no surprise.
While the previous focus may have been on determining taxpayers’ fair shares of tax, the current strategy focusses on tax transparency, where taxpayers’ information is shared with governments around the world. The sudden occurrence of scandals that resulted in the denouncement of major tax evasion schemes that started in 2008 with the fall of the Swiss bank UBS made a major contribution to the development of the new framework of EOI, which was endorsed by the Organisation for Economic Co-operation and Development (OECD) in its fight against harmful tax practices. With estimated losses in annual tax revenues due to tax evasion schemes totalling more than USD 100 billion (OECD, 2021a), it is unsurprising that governments around the globe have been motivated to adopt the new global standard.
The aim of this paper is to explore how the rights of taxpayers have been disregarded in the quest to find a potential solution to curb tax evasion. While AEOI and big data have proved to be effective tools for tax authorities, some concerns about the protection of the rights of taxpayers and taxpayers’ information arise as a result of their use. Accordingly, this paper has been divided into four main sections. After the introductory section, the different rights of taxpayers in the context of AEOI and big data are analysed. Section three delves into the current risks for taxpayers when their information is exchanged or processed on a large scale. Finally, section four includes recommendations about what can be done to ensure that the rights of taxpayers are respected in the context of AEOI and big data.
References
Aberdeen Group & Sovos Compliance. (2016). Stop playing with fire: Use centralised AEOI solutions to prepare for FATCA, CRS, and CDOT. n.p.: Aberdeen Group & Sovos Compliance.
Africa loses more than $84bn in illicit financial flows annually. (2022, June 13). African Business. https://african.business/2022/06/economy/africa-loses-more-than-84bn-inillicit-financial-flows-annually/
Australian Taxation Office. (2021). Data leaks. Australian Government. https://www.ato.gov.au/general/the-fight-against-tax-crime/our-focus/data-leaks/
Baker, P. (2013). Automatic exchange of information - the arrival of a new international norm of taxation. British Tax Review, 4, 371-373.
Baker P., & Pistone P. (2015). General report. In P. Baker & P. Pistone (Eds.), The practical protection of taxpayers’ rights (pp. 1-99). The Hague, The Netherlands: Sdu Uitgevers.
Beer. S., Coelho. M. D., & Leduc. S. (2019). Hidden treasure: The impact of automatic exchange of information on cross-border tax evasion (IMF Working Paper WP/19/286). Washington D.C.: International Monetary Fund.
Binns, R. (2018). Algorithmic accountability and public reason. Philosophy & Technology, 31, 543-556. https://doi.org/10.1007/s13347-017-0263-5
Bourquard, J., & Kirsch, C. (2014, September 1). Big data = Big benefits. State Legislatures Magazine. https://www.ncsl.org/research/telecommunications-and-information-technology/big-data-big-benefits.aspx
Brauner, Y. (2013). United States: Exchange of information and taxpayer protection. In E. C. C. Kemmerman, D. S. Smit, P. Essers, L. De Broe. F. Vanistendael, M. Lang, P. Pistone, J. Schuch, C. Staringer, & A. Storck (Eds.), Tax treaty case law around the globe 2012 (pp. 295-299). Amsterdam, The Netherlands: IBFD.
Christians, A. (2013). What you give and what you get: Reciprocity under a Model 1 intergovernmental agreement on FATCA. Cayman Financial Review, 31, A24-A27 . https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2292645
Cockfield, A. J. (2016). Big data and tax haven secrecy. Florida Tax Review, 18(8), 483-540. https://doi.org/10.5744/ftr.2016.1808
Cockfield, A. J. (2017). How countries should share tax information. Vanderbilt Journal of Transnational Law, 50(5), 1091-1132.
Cockfield, A. J. (2019). Sharing tax information in the 21st century: Big data flows and taxpayers as data subjects. Canadian Tax Journal/Revue Fiscale Canadienne, 67(4), 1179-1199. https://doi.org/10.32721/ctj.2019.67.4.sym.cockfield
Collosa, A. (2021, July 16). Big data in tax administrations. Kluwer International Tax Blog. http://kluwertaxblog.com/2021/07/16/big-data-in-tax-administrations/
Council of the EU and the European Council. (2022). Eu list of non-cooperative jurisdictions for tax purposes. https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-jurisdictions/
Ernest & Young Global. (2022). Kenya signs MCAA for Exchange of country-by-country reports| Implications for MNEs operating in Kenya. https://www.ey.com/en_gl/tax-alerts/kenya-signs-mcaa-for-exchange-of-country-by-country-reports---im#:~:text=On%209%20September%202022%2C%20Kenya,automatic%20exchange%20of%20CbC%20reports
Federico, C., & Thompson, T. (2019). Do IRS computers dream about tax cheats? Artificial intelligence and big data in tax enforcement and compliance. Journal of Tax Practice & Procedure, February – March, 43-47.
Gordon, R. K. (1996) Law of tax administration and procedure. In V. Thuronyi (Ed.), Tax law design and drafting (Vol 1., pp. 95-134) Washington D. C.: International Monetary Fund.
Information Commissioner’s Office. (2017). Big data, artificial intelligence, machine learning and data protection. Wilmslow, England: ICO.
Internal Revenue Service. (2022). Foreign account tax compliance act. https://www.irs.gov/businesses/corporations/foreign-account-tax-compliance-act-fatca
Jaiswal. S., & Biyani. N. (2017). Automatic exchange of tax information: A primer on concepts, loopholes and developing countries’ concerns. New Delhi, India: Centre for Budget and Governance Accountability.
Kalyon, A. (2022). The privacy right of legal person taxpayer. Maliye Çalışmaları Dergisi/ Journal of Public Finance Studies, 67, 107-116. https://doi.org/10.26650/mcd2022-1074312
Krasimirov, A., & Tsolova, T. (2019, July 16). In systemic breach, hackers steal millions of Bulgarian’s financial data. Reuters. https://www.reuters.com/article/us-bulgaria-cybersecurity-idUSKCN1UB0MA
Löfgren, K., & Webster, C. W. R. (2020). The value of big data in government: The case of ‘smart cities’. Big Data & Society, 7(1). https://doi.org/10.1177/2053951720912775
Michel, S. D., & Rosenbloom, D. H. (2011). FATCA and foreign bank accounts: Has the U.S. overreached? Tax Notes International, 62(9), 709-712.
Neve, L. E. C. (2017). The peer review process of the global forum on transparency and exchange of information for tax purposes. Erasmus Law Review, 10(2), 89-105.
Organisation for Economic Co-operation and Development. (1998). Harmful tax competition: An emerging global issue. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2002). Agreement on exchange of information on tax matters. Paris, France: OECD.
Organisation for Economic Co-operation and Development. (2012a). Automatic exchange of information: What it is, how it works, benefits, what remains to be done. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2012b). Keeping it safe; The OECD guide on the protection of confidentiality of information exchanged for tax purposes. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2014). Standard for automatic exchange of financial account information in tax matters. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development, (2015). Model protocol for the purpose of allowing the automatic and spontaneous exchange of information under a TIEA. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2017). Model tax convention on income and capital: Condensed version 2017. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2019a). Global forum on transparency and exchange of information for tax purposes: Transparency and exchange of information on tax purposes: Multilateral co-operation changing the world. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2019b). Model tax convention on income and on capital (Full version). Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2019c). Statement on the data breach in the National Revenue Agency of Bulgaria. https://www.oecd.org/tax/transparency/documents/statement-on-the-data-breach-in-the-national-revenue-agency-of-bulgaria.htm
Organisation for Economic Co-operation and Development. (2021a). BEPS: Inclusive framework on base erosion and profit shifting. https://www.oecd.org/tax/beps/
Organisation for Economic Co-operation and Development (2021b). Global forum on transparency and exchange of information for tax purposes: Tax transparency in Africa 2021: Africa initiative progress report. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2022a). Global forum and global relations and development division release course on the automatic exchange of financial account information. https://www.oecd.org/tax/automatic-exchange/news/global-forum-and-global-relations-and-development-division-release-course-on-the-automatic-exchange-of-financial-account-information.htm
Organisation for Economic Co-operation and Development. (2022b). Global forum on transparency and exchange of information for tax purposes: Tax transparency in Africa 2022: Africa initiative progress report. Paris, France: OECD Publishing.
Organisation for Economic Co-operation and Development. (2022c). Signatories of the Multilateral Competent Authority Agreement for exchange of country-by-country reports (CbC MCAA) and signing dates. https://www.oecd.org/tax/beps/CbC-MCAA-Signatories.pdf
Panayi, HJI C. (2016). Current trends on automatic exchange of information (Singapore Management University School of Accountancy Research Paper, 2016-S-43). https://doi.org/10.2139/ssrn.2748659
Pasquale, F. & Cockfield, A. J. (2018). Beyond instrumentalism: A substantive perspective on law, technology, and the digital persona. Michigan State Law Review, 4, 821-868.
Pistone, P. (2013). Exchange of information and rubik arrangements: The perspective of an EU academic. Bulletin for International Taxation, 67(4/5), 216-225.
Politou, E., Alepis, E., & Patsakis, C. (2019). Profiling tax and financial behaviour with big data under the GDPR. Computer Law & Security Review, 35(3), 306-329. https://doi.org/10.1016/j.clsr.2019.01.003
Sadiq, K., & Sawyer, A. (2016). Developing countries and the automatic exchange of information standard - a one-size-fits-all solution. Australian Tax Forum, 31(1), 99-130.
Sangar, A., & & Blanco, M. C. (n.d.). Leaked data needs to pass the test of ‘accuracy of evidence’. Diazerus. https://diazreus.com/leaked-data-panama-papers-investigation/
Shiel, F. (2022, February 27). About the Ericsson List investigation. ICIJ. https://www.icij.org/investigations/ericsson-list/about/
Smith, J. F. (2015, May 26). Cyberattack exposes I. R. S. tax returns. The New York Times. https://www.nytimes.com/2015/05/27/business/breach-exposes-irs-tax-returns.html
Stiglitz, J. E., & Pieth, M. (2016). Overcoming the shadow economy. Berlin, Germany: The Friedrich Ebert Foundation.
Swissinfo.ch. (2018, May 8). Swiss share tax data with 41 nations. SWI. https://www.swissinfo.ch/eng/politics/spontaneous-exchange_swiss-share-tax-data-with-41-nations/44105036
United Nations. (2021). United Nations model double taxation convention between developed and developing countries 2021. New York, NY: United Nations.
United Nations (n.d.). Universal declaration of human rights. https://www.un.org/en/about-us/universal-declaration-of-human-rights
Wöhrer, V. (2018). Data protection and taxpayer’s rights: Challenges created by automatic exchange of information. Amsterdam, The Netherlands: IBFD.
The U.S Department of the Treasury. (n.d.). Foreign account tax compliance act. https://home.treasury.gov/policy-issues/tax-policy/foreign-account-tax-compliance-act
Downloads
Published
How to Cite
Issue
Section
License
Copyright (c) 2022 Ann Barnshaw Kengaaju, Lakshmi (Celina) Solayen
This work is licensed under a Creative Commons Attribution 4.0 International License.
Our open access status means that authors retain the copyright of their work. However, all papers published in JOTA are done so under a Creative Commons Attribution 4.0 International license (CC BY). This means that others can share and/or adapt your work without your permission as long as they follow certain rules, including attributing your work correctly.
You can learn more about this on our Open Access, Licensing, and Copyright Policies page.
