How does Information Exchange help to combat international tax avoidance?
International tax avoidance is when corporations or individuals try to reduce their tax obligations by shifting income to low or no-tax countries. Information Exchange is an important tool used by governments to combat international tax avoidance. Information Exchange is a process where different national governments share tax records and information with each other. The intent of Information Exchange is to uncover the true income of taxpayers. This helps ensure that multinational companies and individuals are not able to hide their income in one country to avoid paying taxes in another. For example, suppose an individual moves to Minnesota from another country, but still keeps income in the other country. Without Information Exchange, the Minnesota government would have no way of knowing that the individual is still receiving income from the other country. The Information Exchange would allow the Minnesota government to request that the other country’s government share information about any income that the individual is earning there. Overall, Information Exchange is an important tool to combat international tax avoidance. It helps ensure that governments have access to accurate information regarding citizens’ income and ensures that individuals and corporations are paying their fair share of taxes.
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