Tax Information Exchange Agreements and the War Against Tax Evasion

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Kerzner, David
Bank Secrecy Act , TIEAs , FBAR , Exchange of Information , international tax evasion , Automatic Exchange of Information , FATCA , Tax Evasion , Foreign Account Tax Compliance Act , Global Forum , Tax Information Exchange Agreements , FBAR
Illegal tax practices such as tax evasion cost governments billions of dollars of lost revenues. Such practices interfere with tax policy objectives that many nations have adopted to promote equity in the administration of their tax systems. Countries like Canada and the United States which tax their residents (and citizens in the U.S.) on income they earn throughout the world rely on the ability to exchange information with tax havens and other countries in order to administer their tax systems, and combat tax evasion. Tax evasion received new attention with the coming to light of a string of massive tax evasion scandals involving UBS Bank in Switzerland in 2008, and more recently through the leakage of millions of offshore records in 2013. During the past five years, countries have signed hundreds of single purpose treaties to exchange information known as Tax Information Exchange Agreements (TIEAs). Canada has signed 22 of these TIEAs. The primary objective of this thesis is to evaluate the capacity of TIEAs to be an effective tool against offshore tax evasion. It does so firstly by reviewing the policy objectives of TIEAs in order to later determine their performance against these stated objectives. Second, it reviews domestic and international alternative legal mechanisms to obtain foreign based taxpayer information in order to later evaluate the effectiveness of TIEAs to combat offshore tax evasion as compared with these measures, particularly those used by the United States. The research identifies deficiencies in the TIEA and exchange of information regimes and prescribes more effective arrangements to deal with these problems. The central argument of this thesis is that in their current form TIEAs offer fiscal authorities like the CRA a very limited capability to uncover existing tax evasion by residents of Canada. It reviews the TIEA network in Canada, the development and implementation of TIEAs by the OECD and Global Forum from 1998 through 2013, and recent experiences in the field of exchange of information by the United States with Switzerland.
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