The OECD cites two primary authoritative sources for the standards for tax information exchange. They are Article 26 of its Model Tax Convention and its 2002 Model Exchange of Information Agreement on Tax Matters ("Model EOI").
The OECD recently released an update to Article 26 of the Model Tax Convention and its Commentary which includes several noteworthy developments -
o it updates the wording of both the text of Article 26 and its Commentary to reflect country practices and developments in the area of tax information exchange;
o as a new addition to the text of Article 26 it provides that information exchanged for tax purposes may be shared with other judicial and law enforcement authorities for non-tax purposes in the receiving State provided, the information may be used for other purposes under the laws of both States and the competent authority of the supplying State authorizes such use; and
o it clarifies within the Commentary that a request does not need to relate to a specific taxpayer, but may also be in respect of groups of unnamed taxpayers for which the State seeking the information is able to establish a foreseeable relevance link between the group and tax obligations in that State.
One of the examples given to illustrate this clarification in the final bullet point above states:
"h) Financial service provider B is established in State B. The tax authorities of State A have discovered that B is marketing a financial product to State A residents using misleading information suggesting that the product eliminates the State A income tax liability on the income accumulated within the product. The product requires that an account be opened with B through which the investment is made. State A's tax authorities have issued a taxpayer alert, warning all taxpayers about the product and clarifying that it does not achieve the suggested tax effect and that income generated by the product must be reported. Nevertheless, B continues to market the product on its website, and State A has evidence that it also markets the product through a network of advisors. State A has already discovered several resident taxpayers that have invested in the product, all of whom had failed to report the income generated by their investments. State A has exhausted its domestic means of obtaining information on the identity of its residents that have invested in the product. State A requests information from the competent authority of State B on all State A residents that (i) have an account with B and (ii) have invested in the financial product. In the request, State A provides the above information, including details of the financial product and the status of its investigation."
In the last two years three major developments have impacted the evolving parameters for the scope of tax information exchange, respecting its intended application, (i.e. that information exchange should be "to the widest extent possible" and that it should be "effective"). Both notions convey the obligation on States to ensure broad cooperation while curtailing the circumstances in which assistance may be delayed or denied.
The first was the 2010 Amending Protocol to the Joint Council of Europe/OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters. This instrument is to date the most comprehensive mechanism for tax cooperation and information exchange. Its total signatory complement is thirty-five, including all G20 members and a number of other Latin American and African countries. The major practical appeal of the instrument is that it reduces the need for multiple negotiations and creates, at once a large pool of partners with which information may be shared and other methods of cooperation facilitated. The possibility of opting out of other forms of information exchange (i.e. automatic and spontaneous) through reservations exists under this Convention.
The second is an initiative taking place within the OECD referred to as a "whole-of-government" approach to fighting financial crimes. It involves collaboration between the OECD and the FATF to enable cooperation between judicial, law enforcement and domestic agencies (including FIUs) for the sharing of tax information for non-tax purposes.
In support of this initiative the OECD's updated Article 26 includes additional text at the end of paragraph 2, which deals with confidentiality of information disclosed, that reads:
"Notwithstanding the foregoing, information received by a Contracting State may be used for other purposes when such information may be used for such other purposes under the laws of both States and the competent authority of the supplying State authorizes such use."
The revised Commentary issued by the OECD clarifies that the additional wording allows the sharing of tax information by the tax authorities of the receiving State with other law enforcement agencies and judicial authorities in that State on certain high priority matters (e.g., to combat money laundering, corruption, terrorism financing). The revised Commentary continues: "When a receiving State desires to use the information for an additional purpose (i.e. non-tax purpose), the receiving State should specify to the supplying State the other purpose for which it wishes to use the information and confirm that the receiving State can use the information for such other purpose under its laws. Where the supplying State is in a position to do so, having regard to, amongst others, international agreements or other arrangements between the Contracting States relating to mutual assistance between other law enforcement agencies and judicial authorities, the competent authority of the supplying State would generally be expected to authorise such use for other purposes if the information can be used for similar purposes in the supplying State. ....."
The third major development was the change in the FATF 40 Recommendations that revised the anti- money laundering standards in February 2012. The revised 40 Recommendations now require jurisdictions to include tax crimes as part of their respective predicate offenses for money laundering purposes. In short this will enable the FIU to require production of tax information, which may, in turn, be shared with peer FIUs abroad.
It should be emphasized that, according to publicly available information, The Bahamas has not signed any instrument that incorporates Article 26 of the OECD Model Tax Convention. It appears that The Bahamas has to date only signed TIEAs based on the 2002 OECD Model EOI. This includes the Bahamas/US TIEA, which although formatted differently to the more recent slate of TIEAs signed by The Bahamas, nevertheless has been determined to meet the tax transparency standards. Consequently, the contents of its (Bahamas) TIEAs and Commentaries to the Model EOI are what govern their interpretation.
With this in mind and by comparison, Article 8 of the Model EOI, dealing with the issue of confidentiality of information supplied and received under TIEAs, provides in its last sentence:
"The information may not be disclosed to any other person or entity or authority or any other jurisdiction without the express written consent of the competent authority of the requested Party."
As an interpretive guide to Article 8, paragraph 97 of the Commentary to the Model EOI states:
"97. The third sentence precludes disclosure by the applicant Party of the information to a third Party unless express written consent is given by the Contracting Party that supplied the information."
Arguably, the changes to Article 26 and its Commentary on sharing of tax information for non-tax purposes have a degree of consistency with the provisions of Article 8 and its Commentary in the Model EOI. The most obvious difference is the absence of the first conditionality in Article 26, as an expressed requirement in Article 8, which mandates that the disclosure must be permitted under the laws of both States. However, the language of Article 8 accommodates the possibility to include a pre-condition in terms of the first conditionality in the revision to Article 26, as part of the express authorization from the supplying competent authority.

o For further information and details regarding materials referred to in this article please visit the Centre for Tax Policy and Administration website at www.oecd.org.

o Rowena Bethel is a barrister-at-law and former legal advisor to the Ministry of Finance in the areas of international tax cooperation, tax treaty negotiations, financial regulation and the digital agenda. She also served as a member of the UN Committee of Experts on International Cooperation in Tax Matters (2005-2009). She can be contacted at rowenabethel@gmail.com.

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