International exchange of tax information and fundamental rights

The European Commission recently held a consultation on the international exchange of financial personal data, also known as ‘EU rules on administrative cooperation on taxation’ or as ‘DAC’. The purpose of these rules is to exchange data for taxation and anti-money laundering purposes. The announcement of the European consultation is here find. At the moment, DAC is mainly focused on increasing the revenues of EU member states, which can (indirectly) increase EU revenues, and on crime-fighting objectives. 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, see this page where to an English-language pdf with our comments can be clicked through.

In our comments, we explain that international financial exchange should pay attention to citizens' fundamental rights. Clarifying, simplifying and improving EU rules on tax administrative cooperation at the European level would also ensure better protection of EU citizens' financial human rights.

Privacy First pointed out in its consultation response that the international exchange of personal data for tax and other government purposes could cause significant harm to citizens. Such harm is already occurring, for example, in the practices of EU member states regarding FATCA and FATCA conventions, and by third countries' (including the US) misuse of sanctions laws and anti-money laundering legislation as an alibi to target political opponents.

Currently, both the DAC and the new EU anti-money laundering legislation lack mechanisms to protect EU residents from third-country practices 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 due diligence.

The revision of the DAC is a good opportunity to incorporate financial human rights into European financial law. Privacy First calls on the European Commission and other relevant European authorities to do so as part of the revision of the DAC and has made some suggestions to this end. Below are our main suggestions:

• The general framework for exchange under CRS and FATCA will become part of DAC, with appropriate safeguards.
• DAC will include an explicit prohibition on exchange of financial personal data if such exchange would lead to violation of fundamental rights.
• Exchanges with countries outside the EU are strictly regulated, with clear standards on fundamental rights and legal protection.
• Exchange with third countries only takes place if those third countries have been thoroughly audited by experts for compliance with the European Charter, the AVG and other relevant rules.
• Persons at particular risk are enabled to have exchanges with a third country blocked.
• Any person whose data is disclosed to another country will be informed by the authorities.
• Only under strict conditions will companies be required to provide personal data to the authorities (‘return reporting’ or ’third-party reporting’), in order to prevent data protection risks.
• An emergency brake will be included in DAC, which will allow all exchanges with a third country or exchange of information to be stopped on the basis of special circumstances.

To be continued.