Personal Tax Data At Risk Under TIEAs
Thursday, August 5, 2010
A new report by the Society of Trust and Estate Practitioners (STEP) has
highlighted a "worrying lack of basic measures to protect taxpayers from
abuse" when governments exchange tax data under Tax and Information Exchange
STEP notes that there are already well over 300 tax information exchange agreements
(TIEAs) in place between countries and the number is growing rapidly. The
report warns of the increasing risk that, as the TIEA network grows, countries
with poor human rights records and weak data security will gain access to detailed
personal financial data on individuals.
The report concludes that a lack of strong data protection provisions in OECD
standard TIEAs could leave law abiding taxpayers and their families vulnerable
to issues such as threats from criminal gangs who have gained access to tax
David Harvey, STEP Chief Executive, said: “Most TIEAs so far have been
agreed between major economies, such as the UK, and other well run countries.
There is now strong political pressure to expand the list of countries accessing
tax data via TIEAs, bringing in countries where it is harder to be confident
that personal tax data will be secure. It is very worrying, therefore, that
so far there are no clear plans to ensure minimum standards are in place to
protect the public.
Harvey added: "It seems extraordinary, for example, that the current OECD
review process for TIEAs only looks at a country’s performance in providing
tax data. There is no check whatsoever to ensure countries receiving data on
taxpayers’ financial affairs protect that data and respect personal confidentiality.”
As an example of how things might go wrong when detailed personal information
is shared with other governments, the report highlights a recent court case
in the UK where the Zimbabwean authorities seized USD300m of assets after they
became aware that the UK was making anti-money laundering checks on a large
- but legitimate - transaction for someone based in Zimbabwe.
STEP has proposed a set of minimum standards that countries must meet before
getting access to tax data from other countries, including minimum standards
of good governance, basic data protection measures and a right of redress for
taxpayers if things go wrong. STEP also recommends that:
- Only countries meeting agreed minimum standards on objective measures of
quality of national governance (such as those provided by the World Bank data)
should be permitted to have access to personal data on individuals from other
- Clear mechanisms should be put in place to ensure that only ‘relevant
and necessary data’ are exchanged;
- Requests for data should be assessed by a public judicial authority, in
line with the current EU legal framework for data protection;
- Clear measures should be put in place to ensure that the legitimate rights
of individuals are made explicit and effectively enforceable if data exchanged
under TIEAs is abused;
- Independent oversight and supervision mechanisms for TIEAs should be put
in place with regular public reporting.
While the report notes that relatively few TIEAs have been signed with countries
with poor governance records, practitioners and savers have expressed concern
that "political expediency could change the current largely tacit policy
of sharing information only with trusted partners."
States the report: "As the pressure to widen the OECD framework grows it is likely that large,
powerful economies with poor governance records will begin to demand access
to current tax information sharing arrangements. In the absence of explicit
protections, real politik on the part of the major democracies may result in
them getting such access."