International coordination accesses the best enforcement to avoid harmful tax competition

13.Recommendation concerning co-ordinated enforcement regimes (joint audits; co-ordinated training programmes, etc.): that countries consider undertaking co-ordinated enforcement programs (such as simultaneous examinations, specific exchange of information projects or joint training activities) in relation to income or taxpayers benefiting from practices constituting harmful tax competition.

133.Since the late 1970s, a number of countries have developed simultaneous or joint audit programs under which the tax authorities of both countries audit the tax returns of affiliated corporations for the same taxation year. This form of co-operation should be intensified since such audit programmes can help achieve the objectives of this Report.

134.Other types of co-operation between tax authorities are also likely to be effective in improving international tax compliance. For example, the international features of a country’s tax system are among its most technical and complex aspects. It is often difficult for tax departments to ensure that their international audit staff have the proper training to deal with the issues adequately. Joint training activities on topics such as audit strategies, transfer pricing, treaty issues, sophisticated transactions, the design and implementation of CFC and FIF rules etc. could improve compliance by disseminating successful audit practices and by promoting closer contacts between tax inspectors dealing with international transactions. These could take place under the auspices of the Committee and its subsidiary bodies.

135.The Recommendation is aimed at further developing collaboration in that respect. The efforts that will be taken under this Recommendation will typically result in countries combining their information and audit powers in order to better apply domestic tax rules vis-à-vis income from, or entities of, other countries from which such information cannot be obtained. Simultaneous examinations based upon the 1992 OECD Model Agreement should be encouraged.