How does Information Exchange help to combat international tax avoidance?

International tax avoidance is when companies or individuals use legal methods to reduce their taxes and sometimes even avoid paying them altogether. Information exchange is one of the ways countries combat international tax avoidance. Information exchange is an agreement between two countries that allows them to share information about their taxpayers. This exchange of information helps countries identify their residents with overseas assets or income, and then make sure that the taxes due on these assets and income are collected. By exchanging information, countries can keep an eye on their residents’ financial activities and assets across borders. The information collected then allows the country to ensure that their citizens are paying their fair share of taxes. Without information exchange, it would be much more difficult for a government to know about a person’s overseas assets and to take steps to ensure they pay taxes due on these assets. In Indiana, information exchange is enabled through the Multilateral Competent Authority Agreement (MCAA). This agreement ensures that the US government can receive foreign tax information from other countries, as well as share US taxpayer information with foreign nations. This information exchange helps Indiana to better combat international tax avoidance. With this agreement, Indiana is able to identify residents with overseas accounts and assets, and take steps to ensure that those who owe taxes to the state are identified and subject to taxation.

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How does Information Exchange help to combat international tax avoidance?

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