Brunoro Law Blog

Thursday, June 9, 2016

How Brazil is Fighting Tax Evasion

What steps is Brazil taking to work with the international community to fight tax evasion?

In the wake of the Panama Papers scandal, the world's attention has once again been focused on tax evasion. Some estimates are that 8 percent of the world's wealth is deposited in tax havens, which represents trillions of dollars. To combat the problem, the G20 has taken a number of steps to fight tax evasion and Brazil is playing its part in this endeavor.

There are of course legitimate uses of tax havens, but aggressive tax planning leads many wealthy individuals and businesses to avoid taxes by  concealing the actual owners of profits and incomes in areas lacking in transparency. The problem with these maneuvers is that states are deprived of financing that are essential for a democratic social contract. The G20 continues to fight tax evasion and money laundering through such initiatives as the Global Forum on Transparency and Exchange of Information for Tax Purposes (GF), and the Base Erosion Shifting Project (BEPS).

Brazil is one of 130 nations that are participating in the GF which evaluates tax laws of member nations and evaluates ways to exchange tax information. These measures are a continued effort that started with FBAR and FATCA in the US, as well as the OECD's Common Reporting Standard that is on the docket for 2017.

In 2011, Brazil signed on to the Convention on Mutual Administrative Assistance in Tax Matters that will enable it to comply with the CRS which is a comprehensive effort to root out tax evasion, corruption, and even the international financing of terrorism. In 2015, Brazil got a head start by setting up systems to exchange financial information under the FATCA, and these systems will be expanded to meet the requirements of the CRS.

In short, Brazil's commitment to cooperating with the international community occurs against the backdrop of the country's current political and economic crises. As the new regime tries to navigate these challenges, it is essential for Brazil to join in the effort to create international tax transparency and improve the business climate in the country.


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