Brazil Intends to Align Tax Evasion Rules with OECD Standards 

Marcello Cimino
Daniel Villa Real 
Haroldo Almeida Filho

Offshore tax evasion has been an enemy of fiscal authorities worldwide. It is an illegal way of tax reduction, which results in the loss of a great amount of tax revenue annually. It can also be a very difficult crime to spot, mostly because of the many sophisticated schemes used to achieve it and minimize the risk of detection, such as money laundering.

The sharing of information plays a key role in the fight to counter offshore tax evasion. It allows the tracking of certain income flows, therefore providing authorities with the means of piercing a veil of secrecy cast over the source of income and undeclared assets all around the world. Acquiring this sort of information, however, is not an easy task, as access to it can be limited in some jurisdictions through bank secrecy laws.

In order to provide a transparent environment and create a network of information between countries, the Organization for Economic Co-operation and Development – OECD promotes the celebration of agreements regarding the international exchange of tax information, as, for example, the Convention on Mutual Administrative Assistance in Tax Matters, an agreement that allows the penetration of bank secrecy.

Brazil demonstrated the intention of joining the global fight on offshore tax evasion by signing the referred Convention in November 2011, thus confirming the country’s commitment to abide by the internationally agreed standards for tax evasion.¹

When asked about the effects of the Convention, Celso Arruda França, the Head of Financial and Tax Division, Ministry of External Relations of Brazil (Itamaraty), said that this kind of exchange of information cannot be compared to any kind of breach of bank privacy or complete access to all sorts of bank information.²

It is of utmost importance to comment that Brazil, despite having signed the Convention on Mutual Administrative Assistance in Tax Matters, is not a member of the organization at this moment. This means that it does not follow all of the regulations established by OECD. As an example, Brazil has its own transfer pricing rules.

Furthermore, it is also relevant to note that, for the Convention to become valid within Brazil, it must be ratified first. For this purpose, the agreement shall be sent to the Brazilian Congress later this year. 

 ¹  “Tax evasion: Pressure to end tax evasion grows as the Global Forum publishes new reviews”. OECD.org. April 5, 2012. http://www.oecd.org/document/20/0,3746,en_21571361_44315115_50070740_1_1_1_1,00.html.

² Ennes, Juliana. “Brasil terá de se adequar a regras da OCDE de redução da evasão fiscal”. Valor Econômico.com.br. March 27, 2012. http://www.valor.com.br/brasil/2589946/brasil-tera-de-se-adequar-regras-da-ocde-de-reducao-da-evasao-fiscal.