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

SECTION I: THE NECESSITY OF A NEW APPROACH IN MATTERS OF ADMINISTRATIVE ASSISTANCE IN OTHER TO ENHANCE JUDICIAL COOPERATION

To render the international taxation framework more transparent, greater cooperation between tax administrations will be essential. A platform for automatic information exchange and the reinforcement of other measures to prevent tax evaders from hiding behind borders will need to be integrated into the existing system. This could be done by adoption a multidimensional common policy on tax assistance (paragraph I) and the extension of the cooperation out of the CEMAC boundaries (paragraph II)

PARAGRAPH I: THE IMPERATIVE OF ADOPTING A MULTIFACETED COMMON POLICY ON TAX ASSISTANCE

In April 2013, G20 finance ministers adopted automatic exchange of information for tax purposes as a new standard. This was followed in June of the same year by the G8, which committed to work with the OECD to rapidly develop a multilateral model that will make it easier for governments to find and punish tax evaders and avoiders. The G8 also recommended that multinationals provide tax authorities with data on income and taxes by country and that tax authorities were to have access to information on company ownership^181(*). Thus following the aforementioned multilateral policy, it will be recommended for member states of the CEMAC zone to adopt policies aimed at facilitating automatic exchange of information (A), establishing the legal framework governing automatic exchange of information(B) and reinforcing the means of the various institutions in charge of administrative assistance (C).

A: the adoption of automatic exchange of information

Automatic exchange of information within the CEMAC sub region will entail the systematic transmission of information between tax authorities of member states. The information exchanged within this context are to be used only for the purposes of the tax procedure. The conception of automatic exchange of information in the CEMAC zone within the framework of the fight against tax evasion and tax avoidance will imply the processing of a considerable amount of information and its organisation as the information exchanged are sometimes diffuse. Therefore, significant logistical resources must be deployed. The support of computer scientists working on the design of intelligent and increasingly efficient software should enable the tax authorities of CEMAC countries to carry out these tasks with efficiency.^182(*)This automatic exchange of information will be facilitated by the adopted of the legal framework governing the said exchange.

B: the institution of a legal framework governing automatic exchange of information

In other to regulate the automatic exchange of information, the establishment of regulations governing this exchange is indispensable. The European Union done a significant step in this direction thanks to the Council Directive of 15^th February 2011 on administrative cooperation in the field of taxation.^183(*) This directive provided that, as of 1^st February 2014, Member States of the EU had to exchange information on professional income, directors' fees, certain life insurance products, pensions, property and certain real estate income. A from 2017, this list was be extended to dividends, capital gains and royalties. This Directive also regulated the conditions under which a spontaneous exchange of information can take place between tax authorities, as well as the time limits within which the transmission could be done.^184(*)

At the international level, there is also a text that provides for the application of an automatic exchange of information procedure. This is the Convention on Mutual Administrative Assistance in Tax Matters of the OECD and the Council of Europe of 1988. This multilateral convention is open to all states since June 2011. It has the particularity of providing not only the three traditional forms^185(*). The fight against tax evasion and avoidance in the CEMAC sub region will be greatly enhance if apart from automatically exchanging information, the institution handling this exchange were reinforced.

C: the reinforcement of the means of institutions in charge of assistance

Cooperation between tax administrations is vital to combat the development of fraudulent arrangements. These occult activities are often based not on territories but on the concept of networks.^186(*) They are characterized by their ability to play on the differences in control rules and the efficiency of tax officials from one member state to another. It is already difficult for the tax administration of one country to provide appropriate responses to these phenomena, but the task is render more difficult when several countries are involved. It is therefore important to consider strengthening the structures for implementing administrative assistance. One way of doing this could be through the creation of a central African tax commission (A) and to establishment tax attachés and liaison offices (B).

1: the creation of a central African tax commission

The tax commission in CEMAC would contribute to investing in tax control precisely from the perspective of administrative assistance. The Conference of Heads of State decided to create CEMAC executive agencies to relieve the burden of the tasks previously assigned to the CEMAC Commission. We then thought of setting up a structure to coordinate community tax control, at least in its fiscal aspect. Very quickly, we were able to revise our ambitions, since not even a compensation unit for VAT was created. Compared to the Monetary Union, COBAC plays the role of harmonizing and monitoring banking, monetary and financial regulations^187(*). It exercises close supervision over credit institutions and has disciplinary powers over them.

It was therefore appropriate to create such a specialized institution in the CEMAC, perhaps not under this name, but a structure inspired on the organization and functioning of COBAC, whose power to impose sanctions should strengthen the control of legal harmonization. It should remedy the shortcomings of community law. Its absence undoubtedly constitutes an institutional deficiency that neither the tax attachés at diplomatic representations nor the central liaison office could make up for.^188(*)

2: the establishment of tax attachés and a central liaison office

Tax attachés are not new in Western countries, especially in Belgium, France, Holland, England and the United States. They are representatives of the tax administration in the embassies. Their role is to implement the administrative assistance procedures concluded in international tax treaties, in the European framework by the Community law. These attachés act as a relay in the practice of investigations and verifications within the framework of tax audits and the exchange of information for tax purposes.^189(*)

a: The role of the tax attaché

The tax attaché is in charge of carrying out comparative studies and informing the tax administration of his country about the evolution of the tax legislation and of the administrative organization of his country of assignment. He is also in charge of implementing administrative assistance procedures provided for by community texts and conventions in tax matters. It provides individuals and companies with information on taxation and on the application of tax treaties signed between France and Belgium. This is a palliative solution to the fight against tax evasion and avoidance. This example can inspire CEMAC countries to perfect administrative assistance mechanisms, because mutual cooperation is essential in the control of community exchanges.^190(*)

The central liaison office was tested in 1993 with a view to the creation of the common market. It can be set up in CEMAC under the European model. It should be able to function with the impetus given to it by the council of ministers and should be responsible for managing administrative assistance mechanisms on request from tax administrations. It should supply the data bank and tax documents, and send periodic reports to the council of ministers to enable them to better prepare community texts.^191(*)

b:The role of the central liaison office

This office in charge of the implementation of the mutual exchange of information between the States in tax matters within the framework of an administrative assistance agreement. In addition, does comparative analyses of administrative organization and tax legislation. The service provides answers to requests for information by the tax legislations of both countries

However, focusing solely on administrative assistance within the sub region cannot as we have seen guarantee the success of the fight against tax evasion and tax avoidance. That is why there is a crucial need to extend the cooperation to countries found out of the CEMAC zone.

PARAGRAPH II: THE EXTENSION OF COOPERATION OUT OF CEMAC BOUNDARIES

The survival of our community space is largely dependent on its relations with the outside world. Tax evasion and tax avoidance function thanks to the porosity of international tax cooperation. To this end, international cooperation is an alternative to the multinationals that rob the States of the financial resources, which there required to meet the needs of their populations. In view of this, it is urgent to reinvent administrative assistance in the CEMAC zone by expanding to other African countries (A) on one hand and to international organisation (B).

A: an assistance between CEMAC and other Africans States

Cooperation agreements within the CEMAC zone falls within the competence of the Conference of Heads of State. Given the volume of trade and the intermingling of populations of CEMAC member states and those from other regions of the continent, two areas deserve to be addressed at juncture. We have ECOWAS and ECCAS (1) and the neighbouring economic giant Nigeria (2).

1: the need for the signature of a cooperation agreement between CEMAC-ECOWAS-ECCAS on tax assistance

The decried phenomenon (tax evasion and avoidance) annihilates the development efforts of the member states of CEMAC, ECCAS and ECOWAS. It is therefore imperative for these States to develop inter-community tax cooperation arrangements.

The cooperation with ECCAS is much more strategic because of its geographical proximity to CEMAC, but especially because some of the CEMAC States are also members of ECCAS. Therefore, CEMAC and ECCAS should integrate into their programs a synergistic approach with a view of achieving a single, harmonious and efficient regional entity, and this necessarily requires the signing of a platform for the exchange of information and tax information in order to make the commercial and migratory flows within the two entities fluid.^192(*)

As far as cooperation with ECOWAS is concerned, the basis could be the OHADA legislation. Though this organization has not standardized tax law, it is undeniable that company law and accounting law implicitly but definitely include tax aspects, it is therefore necessary for the two communities to provide tax assistance.^193(*) CEMAC would therefore benefit greatly from this cooperation and moreover, more than 50% of intra-regional trade is with ECOWAS. However, CEMAC-ECOWAS tax cooperation should not obscure the need for assistance with neighbouring Nigeria.

2: the urgent need of a tax assistance agreement between CEMAC and Nigeria

The economic and demographic weight of Nigeria seems to be one of the reasons to consider administrative assistance cooperation in tax matters between the said country and CEMAC member states. This need is justified by the fact that, most of the CEMAC states are geographically adjacent to Nigeria. As a matter of example, Cameroon alone shares more than 1,500 km of border with Nigeria. Added to that, Nigeria is the leading African economic power and Cameroon's 3^rd largest economic partner worldwide in terms of imports. Cameroon's imports from Nigeria in 1960 represented less than 1%, it rose to 13% in 2003, then by 27% in 2005. From 2008 to 2016, the large neighbour competed with France and China as Cameroon's leading suppliers.^194(*)

Chad and Nigeria share the shores of Lake Chad, and the Equatorial Guinean maritime front is open to the Nigerian coast. It goes without saying that all these States have direct human, financial and commercial exchanges with Nigeria^195(*), which cannot be ignored for long in the CEMAC zone. Unfortunately, such exchanges do not benefit the States (Nigeria and CEMAC countries) because of anti-tax behaviours. For example, Smuggling is the mode of exchange par excellence between Cameroon and its Nigerian neighbour, a practice which is ruining the economies of these two countries. At the end of this picture, Nigeria is a bridge between CEMAC and ECOWAS and therefore, the need to fight against fraud and financial crimes through administrative assistance in tax matters is therefore fully justified.

B: the extension of the cooperation with international organisation

International assistance cooperation holds out the prospect of administrative assistance with the OECD (1), and the IMF (2).

1: The OECD contribution to administrative assistance

Tax law has become more international with the increasing globalization of economies characterised by the integration and interaction of communities and companies worldwide. This has contributed in making cross-border cooperation in tax matters a hot topic with State being reluctant to relinquish their competence on certain taxes. For example, even within a highly integrated entity like the European Union, the area of direct taxes remains a competence of the member states, a reform at this level facing some difficulties. This is why the OECD is a key player in cross-border cooperation between countries in the domain of exchange of tax information.This organisation has been publishing the model tax convention for over half a century and has been leading the fight against illegal tax havens since the 1990s.^196(*) It is therefore well placed to provide CEMAC with its expertise in administrative assistance.

Indeed, the OECD constitutes a pool of statistical information of primary importance. This organization drafts reports and formulates recommendations on tax matters, which are sometimes used as models for administrative assistance. These information exchange agreements are generally based on the OECD Model Tax Convention on Income and Capital (OECD-MTC).^197(*) Thus, its expertise is evident in the field of assistance. The OECD, through its Committee on Fiscal Affairs, is a veritable laboratory in the fight against international tax delinquency. This shows the interest that CEMAC would have in using its expertise to better arm itself against these phenomena.

2: The IMF expertise in matters of administrative assistance

As mentioned in the first part of our work, tax evasion and Illicit tax avoidance have a significant impact on the economic stability of countries and the broader global financial system. For example, they can drain foreign exchange reserves, affect asset prices, lower tax receipts, distort competition and reduce government revenue. They divert resources from public spending and can cut into the capital available for private investment. Illegal flows can also encourage further criminal activities, undermine the rule of law and political stability of a country. These negative impacts on the broader scale can have a spillover effect on other economies, thereby deepening inequalities and weakening social cohesion across and within countries.^198(*)

Concerning the fight against tax evasion, the IMF for more than 50 years, has been providing technical assistance to strengthen member countries' tax systems, including by improving tax compliance and enforcement. It has worked with several countries to help them develop the legal framework and administrative capacity to exchange tax and banking information, both domestically and internationally.^199(*)

Similarly, the IMF has a longstanding technical assistance program to help member countries strengthen their tax systems to guard against both domestic and international tax avoidance, including but not limited to the issues addressed by the OECD/G20 BEPS project. International taxation issues are also increasingly being raised in Fund surveillance, including in G20 countries. While the IMF is not a standard setter in this area, its staff participates in and contribute to global discussions on international taxation through its analytical work and building on its in-country experience, and participates in relevant multilateral forums such as the Inclusive Framework on BEPS and the UN Committee of Experts in Tax Matters. Finally, the IMF collaborates with the OECD, World Bank and UN through the Platform for Collaboration on Tax, for instance by developing toolkits to help developing countries address challenges in international taxation.^200(*)

From the upshot analysis, it sequels that, the IMF can help CEMAC member states to fight against tax evasion and tax avoidance through technical assistance in the domain of exchange of information and via the expertise it has acquired thanks to its collaboration with experts from OECD, the World Bank and the UN. This collaboration will not only help to prevent tax evasion and tax avoidance but it will contribute to monitor capital movements and repatriation as well as gathering useful information for subsequent investigations. Administrative assistance in the fight against tax evasion and tax avoidance will be rendered more efficient if supplemented by a revitalised form of judicial cooperation.

* ¹⁸¹Joël Samuel NZIE, op.cit.

* ¹⁸² Ibid.

* ¹⁸³ Directive 2011/16/EU of 25 April 2011 on administrative assistance in the European Union.

* ¹⁸⁴Joël Samuel NZIE, op.cit.

* ¹⁸⁵ Ibid.

* ¹⁸⁶MEYONG ABAH Roger, op.cit, p.410

* ¹⁸⁷Section 31 of the Convention governing the Central African Monetary Union.

* ¹⁸⁸ BEGNI BAGAGNA, op.cite. p.412

* ¹⁸⁹Joël Samuel NZIE, op.cit.

* ¹⁹⁰ Ibid.

* ¹⁹¹ Ibid.

* ¹⁹² Ibid.

* ¹⁹³ Ibid.

* ¹⁹⁴ https://ecomatin.net/echanges-commerciaux-le-cameroun-veut-conquerir-le-nigeria/ accessed on 27/04/22

* ¹⁹⁵ The country had an estimated population of 219 million inhabitants in 2021. This represent a giant markets for the economies the CEMAC sub region.

* ¹⁹⁶ OECD.com, op.cit.

* ¹⁹⁷ Ibid.

* ¹⁹⁸ https://www.imf.org/en/About/Factsheets/Sheets/2018/10/07/imf-and-the-fight-against-illicit-financial-flows accessed on 24/04/2022.

* ¹⁹⁹ Ibid.

* ²⁰⁰ Ibid.