International Tax Cooperation and Taxpayers’ Rights-Focusing on the Exchange of Information

Under the economic globalization, free capital flows caused tax competition among countries, and some of them attract foreign investment through lowering tax rate for overseas investors. Since there are differences among tax rates, there is an incentive for individual or business to transfer their capitals from regions with higher tax rate, to regions with lower one, and this damages the tax base of a country. Compared to domestic assets, unless the taxpayer declares income honestly, it is hard for taxation authorities to understand the real status of such taxpayer’s oversea asset, and this makes it hard to process oversea tax inspection. In order to fulfill law enforcement on illegal capital transformation as tax evasion, many countries had made agreements for tax cooperation. As one of methods for tax cooperation, there are three major types for exchange of information, such as exchange of information on request, automatic exchange of information and spontaneous exchange of information. Exchange of information on request is applied to physical case survey, automatic exchange of information is applied in regular tax inspection. Currently, case exchange of information on request is commonly adopted, and through permitting each country to exchange information about their tax payable residents, the taxation authorities can comprehend the status of taxpayer’ oversea asset. After the United States enacted the Foreign Account Tax Compliance Act in 2010, EU Directives and Convention on Mutual Administrative Assistance in Tax Matters went into effect one after another. Tax cooperation among countries can be a norm in the future, and the exchange of information will play an important role in it. Till August 10, 2016, Taiwan has made taxation agreements with thirty countries, and an inter-governmental agreement with the U.S. government. As the human rights attach more and more attention, under the environment for exchange of information, the appropriate policies to protect taxpayers’ rights need to be implemented, in order to ensure such taxation is legitimate and fair. On December 15, 2009 the Legislative Yuan passed the Chapter1-1 of the Tax Collection Act, and this showed the attention on protecting taxpayers’ rights. This paper assembles the practical operation of protecting taxpayers’ rights by some countries. Through comparative analysis, retrospection from it, this study attempts to explore the current status of protecting taxpayers’ rights in Taiwan, and a direction we can follow to improve it in the future.