The director of tax and regulatory policy at the OECD has responded to industry fears that the proliferation of Tax Information Exchange Agreements could put important personal information at risk of abuse.

The tax policy director at the Organisation for Economic Co-operation and Development has moved to allay fears that growing amounts of information passed between governments to root out tax evaders could hit client privacy and put data into the wrong hands.

Jeffrey Owens, director at the Centre for Tax Policy and Administration at the Paris-based club of countries, did not criticise governments’ purchase of stolen private bank data, but he said greater information-sharing agreements should make such practices unnecessary anyway.

He spoke to this publication after the Society of Trust and Estate Practitioners recently warned that as more nations sign Tax Information Exchange Agreements, there is a risk of data being misused if some countries in these deals do not maintain high standards in protecting confidential details. STEP has urged the OECD to tighten standards in this area.

However, while he acknowledged this was an important issue, Owens said the OECD was already well aware of the significance of privacy protection as an important issue for governments.

"There is nothing new here. Protecting the confidentiality of taxpayers’ information has been always very high on our agenda. And in the context of the peer reviews, we will be looking at what measures need to be taken [by countries] to ensure privacy,” he said.

Why is there so much issue in the privacy threat issue now?

"There are two reasons: firstly, there has been a significant increase in the number of TIEAs; and secondly, as countries outside the OECD begin exchanging information, we will need to pay even more attention to this issue," Owens said.

There are a number of provisions, he said, both in Article 26 of the OECD Model Tax Convention and in the Multilateral Convention on Administrative Assistance in Tax Matters, to ensure that client confidentiality is respected.

"No country is going to exchange information with another unless the confidentiality of that information is protected,” he said.

The issue of privacy has become particularly sensitive due to the actions of governments, most notably that of Germany, to pay for information stolen from private banks in Switzerland and Liechtenstein. In the latter case, for example, data taken from LGT by a former employee was paid for by the German authorities. On its face, the issue raises serious questions about governments’ respect for due process of law and the privacy of bank account holders.

The privacy issue has become more urgent, STEP argued, because of the expanding ranks of the OECD – which now has 32 member states – and the expanding number of TIEAs. More than 300 such agreements have been signed. (To view a list of such agreements, click here).

Owens was emphatic, however, that concerns about privacy could not detract from the drive to weed out tax evaders.

“The starting point is that when people don't pay their taxes they are breaking the law and all citizens have not only a direct interest in counteracting evasion (honest tax payers must pick up the bill) but also a duty to inform the tax authorities when citizens evade taxes,” Owens said.

“As regards the use of data supplied by ex-bank employees, this is a sensitive issue but I hope that as better exchange of information is achieved, there will be less need to access this type of information,” he said.

STEP, in its August report, said that the “great majority” of such agreements are between countries that have, in its opinion, a good track record of governance and protecting human rights. But a minority do not fall into this category, and the number of countries trying to obtain tax data through TIEAs is expanding. STEP said that more than 90 countries have joined the OECD Global Forum on Transparency and Exchange of Information For Tax Purposes.

“There are growing concerns that without strong and explicit safeguards, the growing number of countries exchanging data via TIEAs will significantly increase the danger that sensitive personal data will be abused. The risk of abuse would be compounded if there is any general move to automatic information exchange without further strong safeguards,” STEP said.