Cross-border big data flows and taxpayer privacy

Abstract

In the last ten years, governments have initiated several reforms to automatically exchange bulk taxpayer information with other governments (mainly via the Foreign Account Tax Compliance Act, the Common Reporting Standard and Country-by-Country Reporting). This enhanced sharing of tax information has been encouraged by technology change, including digitization, big data, and data analytics, and political trends, including government efforts to reduce offshore tax evasion and aggressive international tax avoidance. In some cases, however, legal protections for taxpayer privacy and other interests are insufficiently robust for this emerging international framework to share big tax data. Conceptually, taxpayers should be seen as 'data subjects' with rights proactively protected by data protection laws and policies, including fair information practices. An optimal regime balancing the interests between taxpayers and tax authorities should include a multilateral taxpayer bill of rights, a cross-border withholding tax in lieu of information exchange, and a global financial registry to allow governments to identify the beneficial owners of business and legal entities.