The previous chapters described recent developments that have increased the need for access to bank information for tax purposes and the adverse consequences that may be caused by the lack of such access. This chapter summarises the current country practices with respect to access to bank information for tax purposes. To the extent that this Chapter summarises these practices, it is based on the results of the Survey of Country Practices on Access to Bank Information for Tax Purposes [Appendix I]. Legal basis for bank secrecy 68. As reflected in the 1985 Report, all OECD Member countries protect in some way the confidentiality of information held by financial institutions. The vast majority of OECD Member countries protect this confidentiality through explicit legislative provisions. Other Member countries do so through tradition or administrative practice or through general constitutional or other rules that protect personal freedoms or privacy. Certain countries rely on the common law principle that the confidentiality of bank information stems from the contractual relationship between the bank and customer. The rules of the civil and criminal codes applicable to this contractual relationship may also protect the confidentiality of customer information held by banks. Exceptions to bank secrecy Non-tax purposes 69. In general, all Member countries allow access to bank information for various non-tax civil and criminal proceedings, both for domestic and 34 international purposes.17 For domestic and international criminal proceedings, all countries oblige banks in at least some instances to provide bank information. In the context of non-tax civil proceedings, all but 3 countries (Germany, Greece, Luxembourg) reported requiring banks to give information for domestic proceedings in at least some instances and all but 4 countries (Germany, Greece, Ireland, Luxembourg) oblige banks to give information for international civil proceedings at least in some instances. In the context of debt collection and bankruptcy, all but 2 countries (Germany, Greece) obligate banks to provide information for domestic debt collection and bankruptcy in some instances, and all but 3 countries (Austria, Germany, Greece) must provide such information for international proceedings in some instances. 70. In addition, all Member countries except Korea (which is waiting for the legislative ratification of the anti-money laundering bill proposed by the Government) and the Netherlands (which does not have legal bank secrecy) have taken measures to relax bank secrecy to combat money laundering. More than half of the OECD Member countries that have taken such measures have some access to this information for tax administration purposes. Tax purposes 71. As discussed more fully below, most countries permit tax authorities to obtain access to bank information through an exception to the general rule or law that establishes the confidentiality of bank information. In a small number of countries, this access is limited to situations involving criminal proceedings or tax fraud. In Luxembourg, tax authorities do not have direct access to bank information for tax purposes and bank information may only be obtained by judicial authorities in cases of suspected tax fraud. Bank account information requirements 72. Access to bank information is valuable to tax authorities only if the bank possesses useful and reliable information regarding the identity of its customer and the nature and amounts of financial transactions. 17. The questionnaire asked countries to respond either “yes,” “no” or “in some instances”. It was not apparent from the answers what distinctions each country made between a:”yes” and “in some instances.” Thus, for purposes of this summary, the affirmative responses are grouped together and contrasted with the negative responses. 35 73. The use of anonymous and numbered accounts may pose a barrier to effective access to bank information for tax administration purposes if the identity of the account holder is not known to the bank.18 However, the vast majority of OECD Member countries prohibit the use of anonymous and numbered accounts. Anonymous accounts may be opened only in Austria and the Czech Republic and only in certain circumstances. Austria intends to reexamine its legislation concerning anonymous accounts in 2000. At present, anonymous accounts may be opened in Austria but only by its residents and only as savings accounts (bank deposit books). However, banks in Austria generally will know the identity of accountholders of large savings accounts. Austria’s foreign exchange regulations require the bank to verify the client’s residence status although the law does not specify the means of verification. Further, withdrawals from these accounts are only possible in cash; transfers to other accounts are not permitted. The Czech Republic limits anonymous deposits to an amount equivalent to US$3700. These deposits cannot be used for business transactions and the trend for the future is to prohibit the opening of new accounts of this type. 74. Numbered accounts may be opened only in Austria, Luxembourg and Switzerland. The identity of the numbered account holder is known by the bank in each of these countries. In Austria, the identity of both resident and nonresident accountholders is known except in the case of anonymous saving deposit books, which may be opened only by residents. 75. With regard to other types of accounts, all Member countries require banks to obtain information to identify the account holder. The level of information and documentation required to open accounts other than anonymous and numbered accounts varies from country to country. In general, most countries require banks to verify the name and address of the client by some type of official documentation (e.g., passport, identity card, driver’s license). Most countries that use tax identification numbers (TINs) require the domestic TIN to be provided to open an account but only ten countries (Denmark, Finland, Iceland, Korea, Mexico, Norway, Poland, Portugal, Spain, Sweden) require the customer to provide documentary evidence of the TIN. In April 1998, Turkey joined the group of countries that has the legal power to prohibit by law the opening of a bank account without a TIN. The Ministry of Finance of Turkey intends to use its legal power to require mandatory use of TINs for banking and other financial services in the near future. Australia and New Zealand do not require TINs to be provided but if they are not provided, 18. Similar difficulties arise with bearer bonds. 36 tax is withheld at the highest marginal rate. Poland requires each bank to establish its own identification and documentation requirements. 76. In general, a bank that does not comply with the information and documentation requirements for opening accounts is subject to penalties, which usually consist of fines or imprisonment of bank officials, or both. In Austria and Switzerland, it may even be possible to revoke the bank’s license. Means of removing funds from accounts 77. In general, there are no restrictions on the means of moving money out of accounts except in Austria. As noted above, Austria restricts withdrawals from anonymous savings accounts to cash withdrawals. It does not permit transfers from such accounts to other accounts. Several countries require reporting of certain types of transfers (e.g., Australia requires the reporting of telegraphic transfers) or transfers over a certain amount (e.g., Italy requires the registration of transactions over 20 million lira). Access to bank information for tax administration purposes 78. There are several ways in which tax authorities may obtain information from banks. One of the ways is through automatic reporting of certain types of information by banks to the tax administration. Currently, 19 Member countries require automatic reporting by banks. In general, countries require automatic reporting with respect to interest paid to taxpayers and on amounts of tax withheld on interest paid. In addition, some countries require the automatic reporting of the opening and closing of accounts, account balances at year end and interest on loans. 79. Some countries (France, Hungary, Korea, Norway, and Spain) have centralised data banks of certain bank account information. France requires financial institutions managing stocks, bonds or cash to report on a monthly basis the opening, modifications, and closing of accounts of all kinds. This information is stored in a computerised database which is used by the French tax administration for research, control and collection purposes. Korea has a separately designated database within the tax administration’s overall database which contains the information reported automatically by banks with respect to their interest payments (i.e., the amount of interest paid, tax withheld on the interest, bank account to which interest accrued, identity of accountholder together with his/her resident registration number or business registration number). This database is utilised mainly for the verification of income tax and 37 inheritance tax returns. The database in Spain is similar in that it identifies for each taxpayer the bank accounts of which he is the accountholder if there has been withholding at source, income from mobile capital if there has been withholding at source, and information on checks on current accounts received in cash over 500 000 pesetas. 80. One of the most important ways for tax authorities to obtain information from banks is through a specific request to the bank for particular information related to the tax case of a specific taxpayer. All Member countries permit their tax authorities, judicial authorities or public prosecutors to obtain information from banks in cases involving certain criminal tax matters. A vast majority also can obtain information from banks for purposes of verifying the tax liability of a particular taxpayer. 81. Several countries (Australia, Czech Republic, Denmark, Finland, France, Italy, Norway, New Zealand, Spain, and Turkey) can obtain bank information for tax administration purposes without limitation. Other countries may need to use a special procedure to obtain bank information such as a requirement (Canada), an administrative summons (United States) or consent of an independent commissioner (United Kingdom). Others have limitations as to the circumstances under which they can obtain information. For example, Portugal may obtain bank information only if a criminal proceeding is pending or if an enforcement order is issued by a court at the request of the tax administration and also in cases where fiscal benefits are provided through bank accounts (e.g., special treatment of retirement savings). 82. In certain circumstances, the tax authorities of some countries have the power to seize documents from banks or to enter the bank premises to examine the bank records directly. For example, Austria has the power to seize documents if the bank refuses to comply with a valid request for information. Italian tax authorities have direct access to the bank premises for purposes of examining bank records when the bank has not provided the required information or if there are doubts as to the completeness or accuracy of the information provided. 83. Most Member countries can obtain information from a bank about a third person who is not suspected of tax fraud but who has had economic transactions with a specified person suspected of tax fraud. In addition, most Member countries can obtain bank information that belongs to a family member of the person about whom the request is made. More than half of the Member countries can obtain information about the account holder’s economic situation, business activities, etc., which the bank has obtained for creditability purposes. All Member countries require banks to reveal whether a named person keeps an 38 account with it except: Austria, Luxembourg, and Switzerland which require the disclosure in criminal cases; Belgium, which will require the disclosure in exceptional cases, especially where there exists a presumption of the existence or preparation of tax fraud, and Portugal (except in criminal cases where a judge can decree the lifting of bank secrecy).