The Emergence of Transparency and Exchange of Information for Tax Purposes on Request as an International Tax Custom

Abstract

In this article, the author contends that transparency and exchange of information on request became an international tax custom. The content of this new international tax custom is the exchange of information on request with regard to all tax matters for the administration and enforcement of domestic tax law without regard to a domestic tax interest requirement or bank secrecy for tax purposes with extensive safeguards to protect confidentiality of the information exchanged (the so called EOI Standard). The emergence of the EOI Standard as an international tax custom is a clear sign of change of the existing global tax governance. There is a realization that international organizations and global forums with expertise in tax matters (especially the OECD, UN, and Global Forum on Transparency and Exchange of Information for Tax Purposes) are actually performing a fundamental role. They influence states’ practices and opinio juris with soft law instruments and peer review procedures that ultimately influence the development of hard law in tax matters, a sphere traditionally conceived as being exclusive to states. The consequences of the emergence of new international tax customs are the submission of states to the international obligation to exchange information on request even in the absence of treaty provisions and the applicability of a state responsibility doctrine in the event of non-compliance. Therefore, if states intend to not lose their almost exclusive role in global tax governance, the role of the existing international organizations and other institutional players must be restrained. The disadvantage, however, is the inability to achieve cooperation in certain strategic matters in tackling double non-taxation arising from aggressive tax planning arrangements. Global tax governance, international tax cooperation, transparency and exchange of information on request, international custom, customary international law, tax sovereignty.