Poor Tax Systems Keep Developing Countries Out of Exchange Agreements

May 27, 2014 International Tax Cooperation

tax in developing countriesPARIS – The international community needs to offer assistance to developing countries to improve their tax system in order to create a cohesive global network of tax information exchange agreements.

A significant portion of developing countries around the world are not able to participate in the international network of information exchange agreements, as their own tax data collection and analysis capabilities are inadequate and far below global standards, according to new findings of the Centre for Tax Policy and Administration (CTPA) of the Organization for Economic Cooperation and Development, detailed in a live webcast on May 26th by its Pascal Saint-Amans.

In his presentation, Pascal Saint-Amans explained that while developing countries are some of the hardest hit by the negative effects of international tax evasion, the governments of many of these nations show strong hesitation towards entering into a unilateral information exchange agreements.

He added that in many cases even if the countries were to make the political decision to join such an agreement, they would not have the internal procedures necessary to facilitate such information exchange, as even the national tax authorities themselves only have limited access to information on taxpayers.

In order to help the governments of developing countries to build up a tax system functional enough to work in line with international standards, Pascal Saint-Amans suggested that the OECD should release a “road map” to help countries address the shortcoming in their tax administration.

Pascal Saint-Amans also said that following such a plan will have positive spillover benefits for the countries themselves, as improving the tax system help boost national tax revenues and minimize the occurrence of tax evasion in the country.

Photo by: Chris Tolworthy