Tax administration

A Framework for Successful Offshore Voluntary Compliance Programmes


31/03/10 - Offshore voluntary compliance programmes offer the opportunity to maximize the benefits of improvements in transparency and exchange of information for tax purposes, to increase short-term tax revenues and improve medium-term tax compliance. To succeed, they need to tread a fine line between encouraging non-compliant taxpayers to permanently improve their compliance (a balancing act in itself) and retaining the support and compliance of the vast majority of taxpayers who are already compliant. To do this, they need to form part of wider voluntary compliance and enforcement strategies. They also need to be consistent with relevant rules in the non-tax area such as anti-money laundering rules. It is against this backdrop that the OECD has developed a number of principles for successful offshore voluntary compliance programmes. They were approved by the Committee on Fiscal Affairs on 15 January 2010.


Over the last year the international tax environment has changed dramatically. The OECD standard on information exchange, developed in large part by Working Party No. 8, has gained worldwide acceptance. More than 80 countries including all major financial centres have committed to the standard and are now in the process of implementing it. More than 150 tax information exchange agreements have been signed and progress is being made in updating tax treaties to reflect the OECD standard. The current financial and economic crisis, the growing public deficits and the political support from G20 have accelerated these developments, as the need to improve tax compliance has become paramount. 


In this changing environment, previously non-compliant taxpayers are realising that there are no longer any safe havens to hide assets and income from tax authorities. A growing number of taxpayers who have failed to report income and assets to their country of residence now recognize that the risk of detection has increased which in turn is leading to a greater willingness to disclose and correct their situation so as to become fully compliant. Governments have and continue to recognise the need to deal firmly with taxpayers who have committed tax evasion and who have failed to come forward before being detected. But governments should also consider taking advantage of this more transparent environment to encourage non-compliant taxpayers to come forward voluntarily. This may not only lead to a short-term boost to revenues but could also strengthen the tax base in the long run. 


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