Legislative mechanisms adopted under Maltese Law regulating exchange of information in tax matters

Abstract

The development of international movement of persons, capital, goods and services – has brought about any benefits to the global economy, however this has unfortunately given rise to the global phenomenon that is tax avoidance and evasion. This has thus resulted in the necessity for co-operation amongst different national tax authorities. International cooperation between tax authorities is an important mechanism in facilitating the proper determination of tax liabilities and securing the taxpayers’ right. The principle of global tax transparency was first brought to the table in 1919 by the League of Nations, however it became of more relevance after the 1963 OECD publication of an International Double Taxation Convention. The principle has really been brought to the forefront of international debate since 2009 and as a result the number of exchange of information agreements has increased dramatically with there being over 1300 bilateral treaties enforced to date. States and their taxpayers need to have assurance in the confidentiality of the information that is exchanged under these agreements. Both, the taxpayers and tax administrations, have a right to assume that any information received by virtue of exchange of information agreements remains confidential, for legitimate reasons. This can be assured through the adoption of adequate safeguards protecting all information that is shared. Confidentiality of taxpayer information has always been a key principle of taxation systems. In order to foster the taxpayers’ ultimate confidence in the tax system and encourage the adherence of the obligations under law, it is necessary that the taxpayers are afforded certain privacy safeguards. One such safeguard is the guarantee that sensitive financial information is disclosed in the appropriate manner. Such guarantee can only be achieved if the information exchanged is unveiled and utilised in accordance with the terms of the relevant information exchange agreement. This assignment sets out to provide a general guidance on the different legal mechanisms implemented under Maltese law to obtain required tax information whilst maintaining an adequate level of protection for the taxpayer.