24 Apr Analytical framework of information-sharing practices in the conduct of tax crime
Summary
Information-sharing is a powerful enabler for countering not only tax crimes but also for enhancing integrity and efficiency in the tax ecosystem. However, the existing information-sharing practices (on many occasions) have not worked effectively, efficiently and consistently. Indeed, best practices in policies, forensics, evidential elements and proof needed for prosecution and successful conviction, as used by stakeholders, are bedevilled with the weak pillars in the information exchange regime.
As evidenced also by the PROTAX Focus Groups (WP2), the key information-sharing obstacles are many but a few include an inadequate operational framework for effective cooperation, weak criminal legal instruments with limited access to law enforcement, inadequate trust amongst law enforcement stakeholders, huge data with limited processing capacity of prosecutors and other law enforcement stakeholders, differences in defining tax offences and thresholds, ineffective technological architecture, and human factors such as poor organisational culture and attitude. Best practices in countering tax crimes could be optimised in relation to effectiveness and efficiency if they were strongly supported by a robust information-sharing regime. A robust information-sharing system is one of the potent tools that can be reliably used by investigators and prosecutors to pursue tax criminals. It requires, among others, availability and accessibility of high quality (valid and reliable) information, competent personnel and institutions with the necessary powers to act on information-sharing demands, trusted exchange systems, and efficient technology.
A more reliable information-exchange framework must imbibe the integration of essential components from different contexts such as legal, organisational, and institutional frameworks as well as from cross-border and cross-sector information sharing standpoints among actors such as law enforcement agencies and other competent authorities as well as financial institutions (such as banks and other obliged entities), and other regulated actors. The financial intelligence-led approach is an interesting proposition because it provides the useful antenna to alert and provide appropriate clarity to the processes, movement of funds and relationships in transactions that give rise to obligations such as tax payment. Accordingly, meaningful and robust reforms to information-sharing and reporting frameworks for law enforcement and other regulating institutions are required. At the same time, public and private sector cooperation is an important component of a well-functioning counter tax crime framework. Heightened exploitation of technological application including the use of new technologies (such as artificial intelligence (AI) and digital twin technology) can also be added to the solution toolkits and collective response mechanisms for countering tax crimes in the EU.
Key Findings
- Information-sharing is a potent tool for deploying law enforcement resources on a risk-based approach and developing innovative strategies and techniques to help in countering tax crimes.
- There are several information-sharing instruments including joint investigation teams, European Investigation Order, Mutual Legal Assistance, FIU.net, ECRIS, Europol (including EFECC), Eurojust, and Egmont group, but they face constraints such as trust issues, poor coronation, limited availability of data on tax crimes, data insecurity, limited coverage, delays, poor data and information overload.
- There is a heightened need to continue to conduct self-assessment and harmonise all information exchange regimes, implement them while working assiduously to find a more reliable exchange of information regime in the EU.
- Exploring and effectively utilising enhanced cooperation mechanisms between critical actors such as investigators, prosecutors and judicial officials are critical ingredients for a robust information exchange regime.
- With a robust IT enterprise architecture and recognised standards on automatic information exchange, there will be a significant decrease in duplication of tax crime data. This requires continuous investment and repurposing as the tax eco-systems evolve.
Please note that the law cited were valid and correct at the time of the reports publication.