On August 21 of this year, the Organization for Economic
Co-operation and Development (OECD) announced that China will be
joining a group of 50 countries (which includes all G20 members) by
adhering to the Convention on Mutual Administrative Assistance in
Tax Matters (Convention)1. The signing took place in
Paris on Tuesday, August 27, 2013. According to the OECD, the
Convention will allow China to participate in global efforts to
combat tax avoidance and evasion by co-operating with other states
in the assessment and collection of taxes.
The Convention is an initiative of the OECD and the Council of
Europe. Throughout this initiative, the OECD and the Council of
Europe have developed a tool aimed at combating global tax
avoidance and evasion by cooperation in the areas of joint audits,
securing information sharing and simultaneous examinations and
assistance in the area of tax collection.
A glimpse into the Convention:
In a nutshell, the Convention can be described as a multilateral
agreement designed to promote international cooperation regarding
tax laws. The Convention includes provisions aimed at preserving
the rights of taxpayers in relation to the exchange of information
More importantly, it must be noted that the Convention embraces
an extremely broad scope by covering almost all forms of compulsory
payments, except for customs duties. Thus, it applies to taxes on
income, profits, capital gains, and net wealth levied at the
central government level. It also covers local taxes, compulsory
social security contributions, estate, inheritance and gift taxes,
etc., going beyond the exchange of information on request. The
Convention is also a cornerstone in relation to tax assistance. It
embeds rules on the exchange of information (including on request,
spontaneous and automatic2), simultaneous tax
examinations, tax examinations abroad, assistance in recovery and
measures of conservancy, and the service of documents.
There is, however, a potential flip side to the Convention since
it may generate additional burdens to business by introducing
another mechanism in the field of automatic exchange of tax
information. A salient example is the U.S.-based Foreign Account
Tax Compliance Act legislation which deals with similar issues but
in a different way.
Further information regarding the Convention on Mutual
Administrative Assistance in Tax Matters is available on the OECD
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