Total lack of international cooperation in tax matters between developed countries, in particular North American and European Union countries, and countries (territory) applying from the perspective of these first countries harmful tax competition , was one for key reasons of the global financial crisis.
Countries (territories) commonly considered to be using unfair tax competition could be successfully used not only for international tax avoidance but also for tax evasion and money laundering through taxation .
This was mainly due to the national law of offshore jurisdiction, which, in principle, do not provide for any form of registration of transactions carried out by international companies incorporated in their territories or any supervision of those entities.
Moreover, international companies are treated in offshore jurisdictions as "extratorial" - provided that their activities are carried out completely outside the state (territory) of their corporations, the local authority itself displaces any control and supervision powers towards these companies.
There are also no publicly available records showing the members of the board, the secretary or the shareholders of those companies. In addition, board meetings can be held anywhere in the world, including by electronic means.
There is also no requirement to keep and collect any documentation of the company in the State (territory) of its incorporation, including data relating to its bank accounts which may be anywhere in the world.
The most important "privileged" which offshore jurisdictions give international companies incorporated in their territories is the absolute exemption from taxation. The fact that virtually all offshore jurisdictions have Anglo-Saxon legal systems or largely based on Anglo-Saxon foundations deserves special attention.
Therefore, one from the most important points of the "legislative offer" of these jurisdictions, addressed to foreign entities, is the respect of trust institutions in the Anglo-Saxon model.
This means that an incorporater of a "international company" in a given offshore jurisdiction and being its real beneficiary, may transfer the formal ownership of the shares in that company to a trustee who will most often also exercise the functions of the trustee board.
At the same time, the equity ownership will remain in the hands of the entrustor - the real beneficiary, who will de facto be in charge of the company.
All decisions concerning the activities of such a company will be taken by its actual beneficiary and Next, they shall be automatically adopted by the fiduciary board as their own on the basis of express and often written access by the actual beneficiary.
The disclosure of any information about the real beneficiaries of international companies is unacceptable under local legislation, and this is virtually impossible, as local authorities do not have and cannot obtain information about the real beneficiaries of international companies hidden behind the trust structure.
Estimates on the scale of the above-mentioned pathologies of international economic trade, although different, indicate macro-economic figures reaching several percent of global GDP.
A summary of the above attributes of the laws of the states (territories) applying harmful tax competition with a total lack of international cooperation led to any attempt to counter the abovementioned pathologies of international economic trade being, in fact, "upfront" doomed to failure a few years ago.
All the more important in the realities of the international financial crisis, it was vital to start the process of signing tax information exchange agreements by these jurisdictions, which were intended to provide full legal assistance and information exchange from tax oases in the international community.
This process has begun In October 2008 , gaining definitely more dynamics In April 2009, when at the summit of the group G20 The OECD presented a progress report on the implementation of the internationally agreed tax standard 9 Special attention should be paid to the fact that the lack of international cooperation in tax and tax matters from offshore jurisdiction has already been recognised at the Paris Conference as a fundamental criterion.
The new list of tax havens to be updated by the OECD was to be based primarily on this criterion, rather than on the previous lists of tax havens based on the criterion of the level of taxation in individual jurisdictions.
This way over and over again first in the history of harmful tax competition, the tax aspect has taken on some of the secondary importance as a criterion for determining the tax damage of a given jurisdiction.
At the Paris conference, the view was made that the new list of tax havens should include countries (territories) which, at a high level of income tax taxation, refuse international cooperation in tax and criminal-tax matters, with restrictive banking secrecy regulations that often prevent the provision of any information to other authorities.
This claim related, inter alia, to Switzerland, Luxembourg and Liechtenstein. As a result of the action taken by the international community, and in particular by the group countries G20, tax havens have signed more than 500 international agreements guaranteeing a certain extent of international tax cooperation on their part.
These actions also included Poland, which, regardless of information exchange agreements on taxation of personal income, has signed to date 14 Agreements for the exchange of information for tax purposes with tax havens, of which only 8 It has come into force to this day.
Agreements with the Isle of Man , Jersey , Guernsey , San Marino , Andorra , the Commonwealth of Dominica , Grenada , Gibraltar , Belize , the Commonwealth of the Bahamas , Liberia , Bermuda , the British Virgin Islands and the Cayman Islands were subsequently concluded .
In spite of certain differences in the scope of the respective agreements , they constitute a legislative calculation of the OECD Model Agreement on the Exchange of Tax Information , in particular as regards the key regulation for the effective exchange of tax information between the relevant authorities of other Contracting States (territories).
As in the case of double taxation agreements , both the construction of the OECD Model Agreement on the Exchange of Information in Tax Matters and bilateral agreements concluded on the basis of this Agreement is detached from the national law of offshore jurisdiction.
Meanwhile, at the interface between the provisions of individual agreements on the exchange of information in tax matters and the national law of states (territory) applying harmful tax competition, there is a discrepancy between the assumed and actual scope of this cooperation that the international community is not interested in.
The analysis of these irregularities requires prior presentation of key provisions of the OECD Model Tax Information Agreement.
In accordance with the provisions Article 1 OECD Model Agreements The relevant contracting authorities are required to provide each other with tax information on the implementation of tax obligations, tax performance and collection, reimbursement and enforcement of tax claims, as well as prosecution or investigation in tax matters.
This information shall have the status of confidential information. This regulation therefore constitutes cooperation in both matters of a strict tax nature and in criminal tax matters.
Further part of the regulation Article 1 The OECD Model Agreement provides that no rights or legal guarantees safeguarding a person under the laws or administrative practices of the State to which second The contracting State has requested information on those persons, must not impede or suspend the effective exchange of tax information between the Contracting States.
This regulation is dictated by the one of the basic attributes of offshore jurisdiction is the differentiation of the legal status of domestic entities (taxable most often at a multi-centerary level) and international companies (totally exempt).
Given the historical experience of banking secrecy and the restrictive local rules on the definition of "criminal offences", and in particular "criminal criminal offences" in the light of the internal legislation of certain countries (territories), the provision Article 5(1) The Model Agreement requires Contracting States (territories) to provide each other upon request with certain information under Article 1, whether or not they concern an act which would constitute a criminal offence under the law of that State if that action were carried out in that State.
This regulation is dictated by the fact that often tax havens have refused to provide the requested information to the authorities of the tax office and the justice system of many countries, given that the action of the taxpayer of the State - the applicant - was not a criminal tax offence under state law (territory) which received the application in this respect.
This restriction also concerned money laundering offences, not only in tax oases, but also in some developed countries with a high level of income tax taxation.
Another regulatory group of the OECD Model Agreement is its provisions Article 2, Article 5 and Article 7, concerning rules, conditions, procedures and restrictions on mutual legal assistance and the exchange of information between Contracting States (territories).
These regulations are crucial for determining the actual scope of cooperation in tax matters between the contracting parties. This is due to the fact that they refer to the national law of the Contracting States (territories) which must allow the possibility of obtaining certain data to be exchanged between States.
Thus, national laws (territories) applying harmful tax competition become the actual legal basis for the exchange of information under the OECD Model Agreement and its international agreements.
source: "International tax avoidance and its regulations in Polish law" Difin SA