The Instruments Used to Counter Illicit Financial Flows at the International Level and Their Application to Matters of Taxation

Abstract

Tax-related illicit financial flows (TIFFs) deprive states of much-needed public resources and hinder revenue mobilization from achieving sustainable development efforts. Currently, there is no conceptual clarity on the phenomenon of TIFFs, with different definitions and approaches adopted within different regional and international settings. To address the existing gaps, this study starts by mapping the diverse qualifications of TIFFs with particular regard to the different legal statuses that can be attached to behaviour deemed illicit. This requires a clarification of the conceptual differences between tax evasion and tax avoidance, and more specifically, between criminal law and (criminal) tax law. While the international tax law agenda has prioritized countering tax avoidance, the issue of tax evasion remains inadequately addressed within the existing framework. In this regard, this study concludes that when it comes to aligning the notion of tax crimes as predicate offence for existing criminal law, countries should be allowed to keep their de minimis qualifying rules to ensure flexibility and respect national sovereignty, thus ensuring proportionality and the respect for taxpayers’ fundamental rights.