Today in Paris, the Committee on Fiscal Affairs (CFA) of the Organisation for Economic Cooperation and Development (OECD) announced new provisions for the exchange of information between national tax authorities. This is part of its drive for improved co-operation to assist in the administration of domestic tax laws and international tax treaties.

Accordingly, Article 26 of the OECD’s Model Tax Convention has been revised. This article covers the exchange of information on tax matters, and its provisions are accepted as providing the international standard for exchange of information between tax authorities. In its updated version, Article 26 now reflects current practices in many countries as well as an agreement between OECD countries on the ideal standard of access to bank information for tax purposes.

Bill McCloskey, Chair of the CFA, noted that this is the first comprehensive revision of the Model Tax Convention’s exchange of information provisions since 1977. More than 2000 bilateral tax treaties are based on the OECD Model Tax Convention.

The OECD believes that the increasing number of taxpayers engaged in cross border activity makes it essential for tax authorities to have an effective legal mechanism for obtaining information from their treaty partners to ensure compliance with the tax laws. Exchange of information provisions, it says, offer a legal framework for co-operating across borders without violating the sovereignty of other countries or the rights of taxpayers.

**Key Changes in Article 26:** *(See link to Article below)*

• A new paragraph has been added to prevent “domestic tax interest” requirements from hindering exchange of information. A domestic tax interest requirement refers to laws or practices that would prohibit one treaty partner from obtaining or exchanging information requested by another treaty partner unless the requested treaty partner had an interest in such information for its own tax purposes. The new paragraph clarifies that Contracting States should obtain and exchange information irrespective of whether they also need the information for their own ax purposes.

• A new paragraph has been added to ensure that ownership information and information held by banks, financial institutions, nominees, agents and fiduciaries can be exchanged. New paragraph 5 prevents bank secrecy from being used as a basis for refusing to exchange information.

• The confidentiality rules in Article 26 have been changed so as to permit disclosure of information to oversight authorities. This change reflects a growing trend in OECD countries. Oversight authorities are authorities that supervise tax administration and enforcement authorities as part of the general administration of the government of a Contracting State.


The report from the CFA notes that there are certain reservations, namely:

• Austria reserves the right not to include paragraph 5 in its conventions. *(However, Austria is authorised to exchange information held by a bank or other financial institution where such information is requested within the framework of a criminal investigation which is carried on in the requesting State concerning the commitment of tax fraud)*

• Switzerland reserves its position on paragraphs 1 and 5. It will propose to limit the scope of this Article to information necessary for carrying out the provisions of the Convention. *(This reservation shall not apply in cases involving acts of fraud subject to imprisonment according to the laws of both Contracting States.)*

• Belgium reserves the right not to include paragraph 5 in its conventions.

• Luxembourg reserves the right not to include paragraph 5 in its conventions.

A release from the OECD notes that the changes made to Article 26 and its Commentary are consistent with the 2002 Model Agreement on Exchange of Information in Tax Matters. That model was developed jointly with a number of non-member economies committed to the principles of transparency and effective exchange of information.

According to Mr. McCloskey, *”Article 26 now reflects the new international standard of information exchange in tax matters. The vast majority of OECD member countries already meet the new standard and I am looking forward to other countries, both inside and outside the OECD, moving towards the standard of information exchange now found in Article 26.”*