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The Role of the Italian Tax Police (‘Guardia Di Finanza’) in Cross-Border Audits and Cross-Border Requests for Tax Assistance

来源:Admin5 作者:Comandante Scuola P. 时间:2014-09-18 23:19

The phenomenon of globalization presents businessmen with an easy opportunity for tax evasion and tax dodging.

In this scenario the awareness of the importance of reciprocal administrative assistance in the fiscal field and the relevant requests to and from foreign

countries for exchanges of information concerning VAT and Direct Taxes have increased.

The increasing globalization of the financial and business markets, the integration of European countries following the tearing down of customs barriers within the EU, and electronic commerce all present businessmen with an easy opportunity for tax evasion and tax dodging.

For this reason, various countries have seen an increasing awareness of the importance of reciprocal administrative assistance in the fiscal field for the purpose of searching for and acquiring data that would enable the conduct of assessments regarding the non-fulfillment by taxpayers of their fiscal obligations. For the Italian Tax Police, such awareness brought about a considerable increase in requests to and from foreign countries for exchanges of information concerning VAT and direct taxes, with 8,326 requests sent and 5,578 requests received during the fouryear period 2004-2007. The legal instruments currently in force, which allow the Italian Tax Administration to exchange information with the equivalent Departments of other countries, are represented by the regulations of international law (substantialized mainly in the various bilateral treaties on revenue and assets regarding double taxation and tax evasion and dodging, consistent with the OECD Treaty Model) and by EC sources which, further regulating the specific matters with reference to individual EC Member States, establish detailed regulations for the exchange of fiscal information.

Where the direct tax sector is concerned, the importance of bilateral agreements for the avoidance of double taxation should be immediately pointed out. While aimed at overcoming potential ‘real territorial conflicts concerning the imposition of a tax’ and at regulating the cooperation between the tax administrations of two countries only, these bilateral agreements in any case brought about homogenization at the international level, being basically modelled on the wording of Article 26 of the previously cited OECD Treaty Model against double taxation, at least for the countries of the OECD area. This model represents a reference ‘draft’ that may be consequently adapted and/ or integrated during bilateral negotiations, in relation to the specifi c needs of the tax administrations of the single contracting countries.

Italy currently has effective bilateral agreements of this type entered into with more than sixty countries (the latest being the Treaty between the Italian Government and the Armenian Government, ratified by law no 190 of 25 October 2007). These treaties are patterned, as a rule, on the layout of the OECD Treaty Model, even if the exchange of information with some countries refers exclusively to the elimination of the cases of double taxation and not the prevention or repression of evasion. Each Treaty contains indication (as a rule in the second article) of the taxes for which reciprocal assistance instruments may be activated, intended as mandatory for the initiation of the assessment, save for additional agreements between the contracting parties.

The usual principles of required reciprocity, prohibition of illegal behaviour or that contrary to domestic practices, and those covering disclosure of business and professional secrecy, must also be guaranteed. The cited Article 26 of the OECD Model, in its most recent version, provides that the exchange of information between the relevant authorities of the countries is carried out with the double purpose of: -bringing about the implementation of specific provisions of the treaty (the so-called restricted clause); and

-allowing the application of the legislation of each single country regarding any type of tax regardless of those regulated by the bilateral treaty (the so-called broad clause). This second aspect presents an important innovative content, the admissibility of which, however, is to be ascertained each time, evaluating both the content and the scope of the single and various bilateral agreements.

In the previous versions, Article 26 OECD Model allowed for the exchange of information only for the taxes provided for by same convention.

The most recent version allows for the possibility of resorting to the exchange of information also when, within the operational business, it becomes necessary to get data and information from abroad necessary for the application of ‘domestic regulations’ and, therefore, in order to prevent tax evasion.

Regarding the possibility of also using the exchange of information in cases of suspected tax dodging, it should be mentioned that, favouring an interpretation of the Treaty founded on the so-called ‘negative limit’ (that authorizes such exchange for the purpose of applying domestic legislation, ‘insofar as the taxation that it provides for is not contrary to the treaty’), it seems necessary to supply a certainly positive response. Therefore, one can resort to the exchange of information also in cases of tax dodging on the condition that these last are specifically provided for by national regulations (see the anti-avoidance legislation contained in Article 37 bis of Presidential Decree 600/1973).

Paragraphs 4 and 5 of Article 26 OECD Model, added on 15 July 2005, are aimed at rendering informative cooperation more effective, with the precise purpose of avoiding the situation where the obligations imposed by the third paragraph of the regulation (above all, those concerning the prohibition to supply information obtainable from an equivalent body on the basis of its domestic legislation or concerning commercial or industrial secrets) can act as instruments for denying informative cooperation, justified on the strength of the inexistent domestic advantage, for tax purposes, of the information exchanged or of he confidentiality of the information possessed by banks, trustees, finance companies, and credit agencies in general (whose exchange was in any case already justified by the prior version of Article 26).

On this point it is still worth acknowledging that it is always possible for a contracting country to refuse to comply with a request for information from another country, possibly alleging the need to comply with commercial, industrial or banking secrecy protection laws. In such cases, as always occurs in the area of bilateral international law, the sanction for the defaulting country shall be the rigorous application of the reciprocity clause and, therefore, the refusal of collaboration on the part of the requesting country.

With specific reference to the exchange of information originating from banks, the countries that currently prove to be willing to carry out exchanges of banking information (and for which, therefore, the principle of reciprocity applies) are Australia, Russia, France, Germany, the Netherlands, Spain, the United States of America and, to some extent, Austria.

Therefore, in relation with the aforementioned countries, Italy must supply, if requested, informative data of a banking nature. Italy cannot plead ‘national interest’ or the absence of the qualification of ‘taxpayer’ of the nonresident subject.

It should still be pointed out, however, that in practicing reciprocity, the quality and quantity of the banking information exchanged shall depend on the greater or lesser protection that each country assigns to banking secrecy. In fact, we move within a surfeit of hypothesis whose antipodes are constituted of those countries where banks automatically communicate information to the tax authorities and those countries where, to the contrary, domestic policy prohibits banks from disclosure of any kind.

As concerns the subjective range of applicability of Article 26 OECD Model, the rule of law, expressly excluding the limitations provided for in Article 1 OECD Model, renders informative collaboration achievable, not only regarding residents but also ‘non-resident’ subjects of one or of both contracting countries.

The OECD Commentary to the Treaty Model, in providing for and regulating the three possible ways in which the exchange of information works (upon request, in a voluntary manner, and in an automatic/systematic manner), introduces the so-called ‘subsidiary principle’ where the exchange upon request is concerned. Under this principle,‘the normal sources of information provided for by domestic tax procedures must be used first’; this means that in order to carry out an exchange aimed at verifying compliance with national tax laws, a country must have first exhausted all means of assessment provided for by domestic laws. It is almost needless to point out that a specific inspection activity of a tax nature must have already been started.

The addressee country of the request has the legal obligation to carry out all the investigations necessary in order to collect the requested information.

The obligations regarding the confidentiality of the exchange of information contained in paragraph 2 of Article 26 OECD Model put the information obtained as a

result of the activity of collaboration on the same level as the data that is acquired by means of assessment procedures provided for by domestic legislation.

It follows that any information received regarding the taxes subject to assessment ‘may only be communicated to the person or the authorities (including judicial authorities or administrative bodies) in charge of the assessment, or the implementation, of the application or of the court summons or the judgment’ except for the possibility of using the information in cases where violations criminally sanctioned by the tax legislation of a contracting country are assessed.

Still on the topic of bilateral cooperation, the Italian tax administration has entered into numerous administrative agreements of a technical nature with foreign tax administrations within the legal framework of Article 26 of the OECD Model, aimed at carrying out simultaneous audits .

Used mostly for audits relative to transactions with countries having privileged tax regulations, to ‘cost sharing’agreements or avoidance practices regarding ‘transfer pricing’, such agreements provide that the relevant authorities of two or more countries may consult, upon the initiative of one of them, in order to simultaneously and independently examine, within their respective territories, the situation of one or more taxpayers that presents, for each of these countries, a common or connected interest within commercial and/or financial relations.

The cases chosen must generally regard one or more taxpayers that carry out transactions with associated companies or through permanent establishments in both of the contracting countries and must be inspired by circumstances such as the signify cant size of the transactions at worldwide level, the high volume of inter-group operations, the allocation of activities in tax havens, transfer pricing manipulation, the attainment of financial results declared in a certain tax period deemed inferior to the actual results, etc.

These tax audits, which are carried out separately within the framework of the respective national legislations and practices and exclusively by the tax administration officials of each country, obviously regard also those belonging to the national tax police corps, insomuch as they are‘officials of the Tax Administration’.

Turning to the so-called ‘multilateral’ cooperation instruments typical of EC law, reference must be made to Directive 77/799/EEC of 19 December 1977, relative to the ‘reciprocal assistance between the relevant authorities of the Member States regarding direct taxes, of some duties and taxes on insurance premiums’.

European law, other than providing for an exceedingly broad fi eld of application (regarding all taxpayers, irrespective of their place of residence or citizenship and concerning all types of taxes on income and capital and all similar duties), subjective and objective, provides, alongside the instruments of the OECD by cited Article 26 (that is to say, the three usual ways of exchanging information – upon request, automatically and voluntarily – and the possibility to carry out the so-called ‘simultaneous audits’), for the additional possibility of authorizing the presence of officials of the requesting country during the procedures for the acquisition of information by the country to whom the request was made (a sort of ‘overseas inland revenue police rogatory’). Therefore, with this latest provision it becomes possible to implement on-the-scene collaborationfor the purpose of facilitating the procedures and personally resolving any kind of applicative problem.

In the Italian legal system, the implementation of the rules and regulations provided for in the EC Directive under discussion involved VAT, with the addition of Articles

65 and 66, paragraph 2, of Presidential Decree no 633/1972, as well as income and capital taxes, this last by way of the introduction, through Legislative Decree no 215 of 19 September 2005, of Article 31 bis in Presidential Decree 600/73.

These last regulations are precisely those that allowed for the insertion, in domestic regulations, of the possibility for the Italian Tax Administration to proceed (for both indirect and indirect taxes) with the so-called simultaneous audits with the tax administrations of Member States, each in its own country and the possibility to authorize the presence in the country of tax administration officials of the other Member State.

Moreover, Directive 77/799/EEC renders the system for exchanging information as a whole more efficient, compared with the aforementioned OECD Model. This directive makes it possible for the requesting Member State to use the information obtained for purposes other than tax and allowing it, as a multilateral cooperation instrument, to also trilaterally exchange information between Member States.

Thus, as occurs with the OECD Model instrument, the principle by which the country to whom the request was made is obligated to give assistance only if all possible means of internal investigations on the part of the requesting country have been exhausted, also remains intact at the EC level.

In order to complete the picture regarding the means for cooperation relative to direct taxes, mention must be made of the ‘Treaty for mutual assistance regarding taxes’ (the ‘Treaty’) entered into in Strasbourg on 25 January 1988 under the joint aegis of the EC Council and the OECD, which Italy ratified, together with eleven other countries, with law no 19 of 10 February 2005.

Such legislative instrument has the ambitious objective of developing, on a common basis and in respect of the fundamental rights of the taxpayer, an extensive administrative cooperation that covers all taxes, direct and indirect, revenue and local, excise duties and social security contributions, with the sole exception of customs duties.

In addition to providing for an efficient means of cooperation (exchange of information between the parties, simultaneous audits and involvement in the verify cations carried out in other countries, recovery of taxes owed in other countries, trilateral exchanges), the Treaty expressly introduced saving clauses on the basis of which all member countries may limit their participation to only some types of reciprocal assistance or to only certain kinds of taxes.

In particular, Italy has availed itself of both clauses. The fact that the Treaty is at all times amendable by way of simple notification to one of the Trustees renders the Treaty particularly flexible and easily adaptable to the changes in domestic laws.

Above all, the Treaty is important because it provides a multilateral international instrument, available to all adhering countries (and not only EU Member States), for the implementation of the already mentioned simultaneous audits and the participation in verifications carried out in other countries.

With reference to the confidentiality of the information received, the clauses contained in the Treaty may be likened to those present in Article 26 of the OECD Model against double taxation and other similar legal instruments. In fact, it is provided for that the Treaty can in no way be interpreted as obligating the country to whom the request is made to adopt measures which are contrary to its legal system or contrary to public order, to supply information that could not be acquired on the basis of domestic legislation, to disclose a commercial, professional or industrial secret, or to grant assistance to a country whose tax regime is in conflict with generally recognized tax principles.

In the end, the Treaty specifies that the country that receives the information from abroad must keep it confidential on the basis of domestic legislation concerning information of the same kind and that this last may only be communicated to the persons or authorities responsible for the audit or collection of taxes as well as those responsible regarding criminal proceedings or claims concerning same taxes.

Lastly, it is necessary to clarify the roles of the various

parties that operate in the sector of international cooperation

in our country.

The authorities responsible for the application of the administrative cooperation instruments regarding Direct Taxes are the Minister of Finance (for the Treaties against double taxation and for the Treaty on mutual administrative assistance regarding taxes) and the Head of the Department of Taxation Policies (for the instruments provided for by Directive 77/799/EEC).

The General Command of the Guardia di Finanza (Italian Financial and Economic Police) and the Revenue Agency have been identified as the ‘Authorities permitted to carry out exchanges of information’ only as regards the ‘upon request’ procedures, within the scope of Directive 77/799/EEC and the Treaties in force in order to avoid double taxation and prevent tax evasion.

For the remaining types of exchanges, automatic and voluntary, the Revenue Agency and the International Relations Office of the Department of Taxation Policies are responsible respectively. For that which expressly regards the activities of the Guardia di Finanza, even though exclusive title of all aspects pertaining to international relations of the Corps remains the domain of the General Command, it may be necessary to resort to international administrative cooperation during the course of carrying out tax audits, whenever the necessity of knowing information relative to Italian business subjects emerges.

The effective suppositions that justify the request may be amongst the most diverse: the subject being audited maintains economic/financial relations with other subjects resident, domiciled or situated in foreign countries, or it is suspected that the same delocalized its profits by way of tax planning techniques; it is necessary to determine the income taxable in Italy of non-resident subjects or to establish the effective fiscal residence of subjects that fictitiously result as residents of or domiciled in another foreign country; or to impede the phenomenon of xenoinvestiture and to fully analyze inter-group transactions between more than one company located abroad, etc.

The units of the Corps may make requests for reciprocal administrative assistance (through the General Command), taking care to verify in advance whether a legal instrument disciplining the exchange of information with the foreign country of interest exists and, in the case of the contemporary presence of more than one instrument, to choose the most suitable one, having considered the preconditions justifying the request and the qualitative level of the expected response.

It should also be pointed out that current EC and international law do not impose deadlines for complying with requests for collaboration. The sole allusion to such problem is found in the cited directive 77/799/EEC, which states that requests must be handled with ‘maximum promptness’ and that only refusals or declarations of the impossibility to cooperate must involve ‘immediacy’.

Usually, therefore, for practices within the Corps, a maximum term for answering requests coming from abroad is provided for.

In the event it becomes necessary during the course of inspection activities of a tax nature to acquire information relative to financial transactions effected by resident and non-resident subjects with credit institutes having offices in foreign countries, the units of the Corps must conform to strictly legal principles, in view of the fact that, should it not be possible to ground the cooperation on one specific legal instrument or in case the subjective or objective limits are surpassed, any element acquired from an authority, national or foreign, cannot be used officially for internal verification activities.

Instead, in the event a request for banking checks must be sent to the corresponding Authority in other foreign countries, the operating unit must submit detailed and justified assistance requests, indicating the type of activities in progress (general, partial, EC level tax assessment, etc.); the individual or corporate body domiciled in Italy against which assessment activities are underway; the taxes which are object of the investigation; the violations already verified or assumed; the necessity to acquire information of a banking nature from abroad in order to continue the audit activity or in order to contest the violation of national fiscal laws; details (where possible) of the relations that should be object of the audit (keeping in mind, by way of example, that in many countries it is not possible to carry out general investigations at any credit institutes); the possible violations committed, or believed to be committed, by the subject controlled in the country to which the request is made; and all other information useful to better guide the activities of the equivalent foreign body(alleged fraudulent behaviour, possible documentation discovered).

In case the banking investigations should regard subjects other than the individual or corporate body being assessed in Italy, it shall be necessary to clarify the relationships

existing with these last and the reasons which make it necessary to acquire information of a banking nature.

It is finally opportune to include the international or EC legislative instrument of reference in the request, in order to avoid any objection from the taxpayer subject to the assessment regarding the irregularity of the acquisition of the information. Lastly, in case of requests on the part of a foreign administration concerning an Italian taxpayer, the tax offi ces and the Guardia di Finanza may exercise the ordinary powers provided for by Presidential Decree no 600/1973 for the receipt of information requests and, therefore, shall activate the usual powers of access, inspection, research, verification, etc., but only in the presence of reciprocity and only where and as permitted by Italian law.

In other words, faced with a specific request for bank investigations in Italy on the part of a foreign authority, an evaluation of whether Italian law allows such type of inspection must be made.


*The article is from "INTERTAX, Volume 37, Issue 1, 2009 Kluwer Law International BV, The Netherlands".



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