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The Rule of Law and the Effective Protection of Taxpayers’ Rights in Developing Countries

50 Pages Posted: 12 Sep 2017  

Irma Johanna Mosquera Valderrama

International Bureau for Fiscal Documentation (IBFD)

Addy Mazz

Universidad de la República

Luis Eduardo Schoueri

University of Sao Paulo (USP)

Natalia Quiñones

Independent

Jennifer Roeleveld

University of Cape Town (UCT)

Pasquale Pistone

Vienna University of Economics and Business

Frederik Zimmer

University of Oslo

Date Written: August 31, 2017

Abstract

The overall aim of this article is to analyse the taxpayers’ rights in relation to the emerging standard of transparency with specific reference to Brazil, Colombia, South Africa and Uruguay. Exchange of information between tax authorities is increasing rapidly all around the world. This global development is largely the result of the introduction of the standard of transparency by the Organization for Economic Cooperation and Development (“OECD”) with the political mandate of the G20 and more recently, in 2013, the introduction of the global standard of automatic exchange of information. Governments have agreed that exchange of information is necessary to prevent tax evasion and to tackle tax avoidance including aggressive tax planning. All surveyed countries have accepted the standard of transparency including the standard of automatic exchange of information. Furthermore, it is evident that the development of such standards appears to have taken place in a coordinated manner, led mainly by international organizations comprising governmental officials.

This article has first provided a comparative overview of the rules that Brazil, Colombia, South Africa and Uruguay have introduced to protect the taxpayers’ rights in the exchange of information process being the right to access to public information, the right to confidentiality, the right to privacy, and the procedural rights (right to be informed, the right to be notified and right to object and appeal). Thereafter, this article has assessed whether the rules introduced by the surveyed countries to protect these rights are consistent with the fundamental taxpayers’ rights that belong to the rule of law of these countries and with the principles of good governance and fiscal transparency.

The main conclusion is that the countries have introduced to some extent similar rules to protect the right to confidentiality, right to privacy and the procedural rights in the exchange of information. However, some differences may be found in the detail level of protection of confidentiality in South Africa and in respect of the procedural rights in Uruguay. One of the drawbacks of these rules is that the rules introduced by the surveyed countries do not ensure that the protection of the right to confidentiality and the right to privacy is effectively guaranteed. The results of the analysis show that these rules do not protect the taxpayer in case of breach of confidentiality or misuse of the information exchanged.

This article argues that the differences among rules and the lack of protection for taxpayer information may hinder the effective protection of the taxpayer and the tax administration should guarantee the protection of the taxpayer rights as part of the rule of law. Therefore, this article provides in Section 4 three recommendations addressing the right to confidentiality, the right to privacy and the taxpayers’ procedural rights. These recommendations may be extended (as best practices) to other developing countries on a similar economic and legal scale. However, further research will be needed to see whether the conclusions of this article are also applicable to (other) developing countries.

Keywords: Exchange of Information, Tax Law, International Tax Law, Offshore Tax Evasion, Aggressive Tax Planning, Data Protection, Developing Countries, Tax Governance

JEL Classification: K33, K34, E62, E63, F62, H26, O23

Suggested Citation

Mosquera Valderrama, Irma Johanna and Mazz, Addy and Schoueri, Luis Eduardo and Quiñones, Natalia and Roeleveld, Jennifer and Pistone, Pasquale and Zimmer, Frederik, The Rule of Law and the Effective Protection of Taxpayers’ Rights in Developing Countries (August 31, 2017). WU International Taxation Research Paper Series No. 2017-10. Available at SSRN: https://ssrn.com/abstract=3034360

Irma Johanna Mosquera Valderrama (Contact Author)

International Bureau for Fiscal Documentation (IBFD) ( email )

H.J.E. Wenckebachweg 210
Amsterdam, 1096 AS
Netherlands

Addy Mazz

Universidad de la República

Avenida 18 de Julio 182
Montevideo, 11100
Uruguay

Luis Eduardo Schoueri

University of Sao Paulo (USP) ( email )

Rua Luciano Gualberto, 315
São Paulo, São Paulo 14800-901
Brazil

Natalia Quiñones

Independent ( email )

No Address Available

Jennifer Roeleveld

University of Cape Town (UCT) ( email )

Private Bag X3
Rondebosch, 7701
South Africa

Pasquale Pistone

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

Frederik Zimmer

University of Oslo ( email )

PO Box 6706 St Olavs plass
Oslo, N-0317
Norway

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