The role of judicial cooperation in the fight against tax evasion and tax avoidance in the CEMAC zone

SECTION II: THE LACUNAS OF THE CURRENT JUDICIAL AND ADMINISTRATIVE COOPERATION INSTRUMENTS

The lacunas of the current judicial and administrative cooperation instruments used are characterised by the disuse of sub-regional administrative assistance in the CEMAC zone (Paragraph II) on one hand and on the other hand by theabsence of a harmonised sub-regional approach on the modalities of judicial cooperation (Paragraph I).

PARAGRAPH I: THE ABSENCE OF A HARMONISED SUB-REGIONAL APPROACH ON THE MODALITIES OF JUDICIAL COOPERATION

Member states of the CEMAC sub-region have not have not been able to agree on unique approach in fighting against tax evasion and tax avoidance. This limitation is concerns both administration and judicial cooperation and is materialised by the significant weight of sovereignty claims by CEMAC member States (B) as well as the timid harmonisation of tax rules (A).

A: The timid harmonisation of tax legislation

The harmonisation of tax rules will enable member states of the sub-region to fight against tax evasion and tax avoidance in a more effective and efficient manner. This will further have the advantage of strengthening the integration process as well as the business climate is CEMAC zone. But unfortunately, it appears that some member states have been reluctant to the prescriptions made by the community legislator in that domain. For the community legislator has determined the VAT rate to range between 15 to 19%. As a result, the minimum VAT rate applicable in CEMAC is 15% and the maximum rate is 19%. National tax legislation of member states seems to have complied to it except Cameroon wherein, added to the initial 17.5%, there is an additional 10% representing the Council additional tax.^174(*) Thus making a total levy of 19.25% on the added value of the company, a levy above the maximum rate of 19% authorized by the CEMAC directive. This is a total violation of this the CEMAC directive n° 07/11-UEAC-028-CM-22 of 19th December 2011, relating to VAT and excise duties given that, 19.25% is numerically above 19%. Added to this challenge, there is there is the a strong desire by member states to preserve their sovereignty.

B: The significant weight of sovereignty claims by CEMAC member States

Politically, judicial cooperation in tax matters is a field of confrontation between supporters of state sovereignty and those who advocate for the lowering of sovereignty barriers of for more effective cooperation. The reason, as already mentioned, is that States have always protected the monopoly of dispensing justice and collecting taxes on their territory. The right to impose and collect taxes as well as the right to punish in case of any violation of the laws in force are amongst other thing one of the main State prerogative as highlighted by Jean Jacque Rousseau in the social contract.^175(*) However, faced with the increasing rise of tax evasion, tax avoidance and other forms of illicit financial flow of cash such money laundering coupled to the inadequacy of national responses, states had no other option that to cooperate. A Cooperation, which entailed, relinquishing part of their sovereignty in the affected domains. Though easier said than done, reason being that, they continue to cling on their internal rules and polies at for selfish or egoistic purposes. This has the effect of slowing down cooperation be it administrative or judicial.

PARAGRAPH II: THE DISUSE OF SUB-REGIONAL ADMINISTRATIVE ASSISTANCE IN THE CEMAC ZONE

The convention on mutual administrative assistance in force in our community space is more than fifty years old and it is therefore necessary to rethink and adapt it to the new forms of tax evasion and avoidance. The UDEAC of 14^th December 1965 convention inherited by CEMAC is limited to the exchange of information and a classic framework of cooperation.^176(*) Hence, there is a need to update the aforementioned convention in line with Community realities, thereby putting an end to its anachronistic nature (A) and creating a community approach based on the new modalities of administrative assistance(B)

A: The anachronistic nature of community administrative assistance instruments

Tax treaties constitute the legal framework for administrative assistance. Thus, the convention inherited from the defunct UDEAC sets out the three modalities of administrative assistance mentioned above, i.e. spontaneous, on request and ex officio exchange of information for tax purposes. These three modalities are subject to the same community legal regime. The difference is that most international tax treaties merely establish the principle of an exchange of information between tax administrations without specifying the modalities.^177(*)

The wording of the UDEAC convention relating to exchange of information has followed the recommendations of the OECD model convention to the letter. This convention is showing signs of obsolescence in that, it does not follow the spirit of the community construction but rather that of international conventions since it uses the term "mutual" instead of "community". Beyond that, the said convention does not explain the third modality of administrative assistance, which is the automatic exchange, although it is more efficient. It is therefore necessary for CEMAC to adapt its convention on administrative assistance in tax matters not only to OECD methods but also to the requirements of the community construction.^178(*)

B: The failure to adopt a community approach based on the new modalities of administrative assistance

The construction of a Community space guaranteeing transparency must be reflected in the strengthening of administrative cooperation between the tax administrations of the various Member States, the objective being to ensure the effective control of intra-Community tax operations. It is clear that the current state of mutual assistance is only halfway working because of the difficulty of tracing taxpayers within the community, the inability of most States to implement their own internal procedures and the complexity and misunderstanding of mutual assistance agreements^179(*).

The above diagnosis of the dysfunction of Community administrative assistance seems to be well established in principle but poorly justified. However, in order to perfect the methods of exchanging information, the convention should include: the keeping and computerisation of this information, the centralisation of tax information, and the Exchange by electronic means. Thanks to this type of assistance, it will be possible to detect the flow of exchanges and the identities of the companies concerned by means of servers. VAT assistance is an innovation in this field in the European context. It is therefore necessary to revolutionise assistance in the CEMAC.^180(*) In any case, the fight against tax evasion and tax avoidance cannot be perfect if judicial and administrative cooperation processes does not integrate and adopt a new approach.

CONCLUSION OF CHAPTER III

The fight against tax evasion and tax avoidance is characterised by some problems. These problems ranges from the absence of a harmonised sub-regional approach on the modalities of judicial cooperation, to the disuse of sub regional administrative assistance instruments as well as institutional and structural shortcomings. These challenges thus justify the imperative need for effective and efficient solutions to be adopted within the CEMAC sub region and even beyond.

CHAPTER IV: THE NEED OF ADOPTING A NEW APPROACH IN OTHER TO ENHANCE JUDICIAL COOPERATION IN THE FIGHT AGAINST TAX EVASION AND TAX AVOIDANCE WITHIN THE CEMAC ZONE

In order to render the fight against tax evasion and tax avoidance more efficient, a new approach of cooperation is required. This is because, as time goes on, tax evaders and avoiders device new strategies to escape the payment of due taxes and to exploit the loopholes of the tax legislation. Thus, this new method of cooperation could be implemented by the need to revitalise sub-regional judicial cooperation (Section II) and by the necessity of a new approach in matters of administrative assistance so as to enhance judicial cooperation (Section I).

* ¹⁷⁴Joël Samuel NZIE, op.cit. note 116.

* ¹⁷⁵Théophile NGAPA, op.cit.

* ¹⁷⁶Joël Samuel NZIE, op.cit.

* ¹⁷⁷BEGNI BAGAGNA, L'harmonisation des politiques fiscales en zone CEMAC : esquisse de théorie du droit fiscal communautaire, Thèse de Doctorat Ph.D, Université de Douala, 2012, p 403.

* ¹⁷⁸Joël Samuel NZIE, op.cit.

* ¹⁷⁹MEYONG ABAH Roger Athanase,L'harmonisation fiscale et douanière en zone CEMAC: fiscalité communautaire en Afrique centrale (Cameroun, Centrafrique, Congo, Gabon, Guinée Equatoriale, Tchad), Editions universitaires européennes EUE, Berlin, 2011, p.37

* ¹⁸⁰Joël Samuel NZIE, op.cit.