IEIM210310 - Legal framework for exchange: Types of international agreement: The OECD/CoE Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Taxes covered by the Convention
The OECD Multilateral Convention on Tax (MAC) has the capacity to cover a very wide variety of taxes, including VAT and excise, and the very broad “any other taxes”. It expressly does not apply to customs duties. This very broad coverage, however, can be constrained: the MAC allows participating jurisdictions to enter reservations which limit the taxes with respect to which they will exchange.
A list of the taxes reserved against is available on the Council of Europe website. (This content has been withheld because of exemptions in the Freedom of Information Act 2000)
The UK has agreed to exchange with respect to all of those listed apart from:
- Taxes imposed by, or on behalf of, political subdivisions or local authorities; and
- Social security contributions.
Where a jurisdiction has entered reservations about exchanging on a particular tax, this applies both to prevent exchange for the purposes of that tax, and to prevent use of information that has been exchanged for permitted taxes in assessment of the tax reserved against. There is more on use for other taxes in IEIM200200.
Example
Jurisdiction X has entered a reservation against exchanging with respect to VAT and sales taxes. They have made no reservations about exchanges for the purposes of taxes on income, or estate or inheritance taxes. This means that Jurisdiction Y cannot ask Jurisdiction X for information they intend to use in the assessment of VAT, but they could ask about income tax or inheritance tax.
Jurisdiction Y approaches them for information with respect to income tax, which is provided. In the course of the enquiry the officer in Jurisdiction Y realises the information obtained would be useful in assessment of the customer’s liability to VAT. Since Jurisdiction X has entered a reservation against exchange with respect to VAT, even though the information was obtained for the purposes of income tax, it cannot now be used for the purposes of VAT.
In the same situation as above, that information obtained for income tax purposes could be used in assessment of inheritance tax, because Jurisdiction Y has not entered reservations against exchange for the purposes of estate or inheritance tax.