International exchange of tax information and fundamental rights

The European Commission recently held a consultation on the international exchange of personal financial data, also known as "EU rules on administrative cooperation in the field of taxation" or "DAC." The purpose of these rules is to exchange data for the purposes of taxation and combating money laundering. The announcement of the European consultation can be foundhere. At present, DAC is mainly focused on increasing the revenues of EU Member States, which may (indirectly) increase EU revenues, and on crime prevention objectives. However, too little attention is paid to human rights and other fundamental rights enshrined in the European Charter and other European legislation.

Privacy First participated in the consultation. Please refer tothis page, where you can click through to an English-language PDF containing our comments.

In our commentary, we explain that attention must be paid to citizens' fundamental rights in international financial exchanges. Clarifying, simplifying, and improving EU rules on administrative cooperation in the field of taxation at the European level can also ensure better protection of the financial human rights of EU citizens.

Privacy First pointed out in its consultation response that the international exchange of personal data for tax and other government purposes can cause considerable harm to citizens. Such harm is already occurring, for example in the practices of EU Member States with regard toFATCAand the FATCA treaties, and through the abuse by third countries (including the US) of sanctions legislation and anti-money laundering legislation as an alibi for targeting political opponents.

Currently, both the DAC and the new EU anti-money laundering legislation lack mechanisms to protect EU residents from practices by third countries that violate citizens' fundamental rights. It cannot therefore be taken for granted that the international exchange of personal financial data will take place in accordance with fundamental rights and with the necessary care.

The revision of the DAC is a good opportunity to incorporate financial human rights into European financial law. Privacy First requests the European Commission and other relevant European authorities to do so in the context of the DAC revision and has made a number of suggestions to this end. Below are our main proposals:

• The general framework for exchange under CRS and FATCA will become part of DAC, with appropriate safeguards.
• The DAC will include an explicit prohibition on the exchange of personal financial data if such exchange would lead to a violation of fundamental rights.
• Exchanges with countries outside the EU are strictly regulated, with clear standards in the area of fundamental rights and legal protection.
• Exchanges with third countries will only take place if those third countries have been thoroughly audited by experts for compliance with the European Charter, the GDPR, and other relevant rules.
• Persons at particular risk are enabled to block exchanges with a third country.
• Any person whose data is transferred to another country will be informed of this by the authorities.
• Only under strict conditions are companies required to provide personal data to the authorities ("reporting" or "third-party reporting") in order to prevent data protection risks.
• DAC includes an emergency brake that makes it possible to halt all exchanges with a third country or intelligence sharing on the basis of exceptional circumstances.

To be continued.