How Countries Should Share Tax Information

Offshore tax evasion, international money laundering, and aggressive international tax planning significantly reduce government revenues. In particular, for some low-income countries the amount of capital flight (where elites move and hide monies offshore in tax havens) exceeds foreign aid. Governments struggle to enforce their tax laws to constrain these actions, and they are inhibited by a lack of information concerning international capital flows. The main international policy response to these developments has been to promote global financial transparency through heightened cross-border exchanges of tax information.

The Article examines elements of optimal cross-border tax information exchange laws and policies by focusing on three key challenges: information quality, taxpayer privacy, and enforcement. Relatedly, the Article discusses how the exchange of automatic "big tax data" combined with data analytics can help address these challenges. The recommended laws and policies will improve how countries share tax information, which in turn will help inhibit global financial crimes.