On Monday, April 15, members of the Cypriot Parliament began debating amendments to the Law which oblige local authorities to request access to individuals' banking information concerned with taxes or duties levied on behalf of the European Union.
The innovations created by the Ministry of Finance concern the obligations of Cyprus, as an EU Member State, to fully harmonize with the relevant EU Directive, after Brussels notified Nicosia of the shortcomings of the current domestic Cypriot legislation. Specifically, the issue in question is Council Directive 2010/24 on "mutual assistance in the recovery of claims relating to taxes, duties and other measures."
During the discussion, agency officials told members of the Cypriot Parliament that the shortcoming of the domestic legislation relates to the fact that its current form does not clearly state that the Cypriot authorities are obliged to require the lifting of bank secrecy when concerning the collection of taxes and duty. A representative of the Cypriot Ministry of Interior said that he agreed with the proposed changes, as did representatives of the banking association and the Central Bank.
A representative of the tax authority explained how the problem arose. The Cypriot law, which was adopted earlier to harmonize with the EU directive, had a flaw in its interpretation. The fact is that the wording of the text suggested that the Cypriot authorities could refuse to provide mutual assistance in such cases by lifting bank secrecy.
The representative of the Commissioner for Personal Data Protection said that they also agree with the proposed amendments as they stem from obligations to the EU. However, he highlighted the fact that the text of the amendments does not specify which "authorities" can require banks to disclose bank secrecy. In turn, the Ministry of Finance explained that the authorities making such requests would be formally disclosed on a case-by-case basis. This response satisfied the Commissioner's office.
Recall that Council Directive 2010/24 applies to claims relating to "all taxes and duties of any kind levied by or on behalf of a Member State or its territorial or administrative subdivisions, including local authorities, or on behalf of the European Union".
It does not apply to compulsory social security contributions paid to a Member State or a subdivision of a Member State or to "social security institutions established under public law, nor to charges of a contractual nature, such as remuneration for public utilities.
It should be noted that in modern conditions effective tax administration presupposes, among other things, effective interstate exchange of tax information. However, such exchange can be carried out only in the forms and within the limits established by law and international treaty, without violating the principles of tax, banking and commercial secrecy, as well as other legal guarantees of confidentiality of corporate and financial information.
Measures aimed at creating mechanisms for the international exchange of information and achieving greater transparency in this area are currently being actively implemented at several levels:
- At the level of international organizations (primarily OECD/OECD - Organization for Economic Cooperation and Development), as well as within the framework of bilateral cooperation between states;
- at the level of the European Union;
- at the level of domestic legislation of individual countries.