Collaboration in Latin America: the region's call and response to the fight against tax and financial crimes
by Nilimesh Baruah, Senior Advisor for Tax and Crime at the OECD, and Natalie Burg, Consultant, TIWB-CI Programmes
9 February 2022
Latin American countries recognize that tax evasion is a serious issue for the region. Since 2018, fifteen countries have signed the Punta del Este Declaration, which pledges to strengthen tax policy and administration, to reduce illicit financial flows (IFFs), and to adopt the whole-of-government approach reflected in OECD’s tax and crime work. The declaration draws on the Oslo Dialogue of 2011, whereby 46 tax administrations deemed the whole-of-government approach, defined as "harnessing the capacity of different government agencies to work together to detect, deter and prosecute tax crimes", as necessary to fight the complex crime networks seen in today’s society. As with many high-level policy initiatives, the implementation of these approaches is the true challenge.
Several recent initiatives demonstrate Latin American countries’ drive to go beyond prose towards practice. Whether it be via the joint OECD/UNDP initiative, Tax Inspectors without Borders’ Criminal Investigation (TIWB-CI) programmes or initiatives of the OECD’s Task Force on Tax Crimes and Other Crimes (TFTC), the commitment towards growth and systemic change is evident.
The tax administrations of Costa Rica, Honduras, and Mexico demonstrate such drive as they have engaged in strong partnerships under TIWB-CI programmes. TIWB-CI programmes provide bilateral technical assistance to developing countries in the area of tax crime. Working together, the paired administrations adopt a learning-by-doing approach to benefit from the partner administration’s experience to work on complex cases of tax crime, equip tax investigators with critical skills, and initiate reforms to address capacity gaps.
The TIWB-CI programme in Honduras, with the support of Mexico, demonstrates this approach. In the first phase of the programme, Honduran officials conducted an intensive gap analysis process using the OECD’s Tax Crime Investigation Maturity Model and guidance of experts from the Mexican Procuraduría Fiscal de la Federación. Following the systemic analysis, a work plan was devised in Fall 2021 to address the most pressing tax crime investigation issues for Honduras. In this second phase of the programme, Mexican experts have reviewed Honduran investigative procedures, drawing on Mexico’s own recent policy reforms to provide advice. The Mexican experts are now guiding case investigation through hands-on assistance.
The casework between the two countries has given light to a key issue in Honduras: the need for information-sharing between agencies working in tax crime. As acknowledged in the second edition of the OECD’s Ten Global Principles for Fighting Tax Crime, “the ability to receive information from other agencies may reduce the duplication of work by different agencies, increasing the speed and reducing the cost of investigations, resulting in faster and more successful prosecutions, and increasing the likelihood of the proceeds of crime being recovered”.
Alongside guidance how to obtain information available to tax authorities under current Honduran law, the TIWB-CI experts are helping to identify mechanisms to improve access to information for intelligence and investigation, while strictly abiding by the confidentiality standards supported by the OECD’s Global Forum on Transparency and Exchange of Information for Tax Purposes. Moreover, this TIWB-CI programme brings together members from both the Honduran tax administration and public prosecutor’s offices in the interest of pursuing a whole-of-government approach to criminal tax investigation.
Virtual mission between Honduran and Mexican tax crime officials
The TIWB-CI programme in Costa Rica is also emphasizing a whole-of-government approach. In January 2022, a strategy session organised by the TIWB Secretariat brought together nine agencies in Costa Rica to discuss how to collaborate on tax crime issues and align respective strategies within the country. As noted by Karla Salas Corrales, Director of Audit and Investigation of Tax Fraud of the Costa Rican Tax Administration, “the first meeting held on 14 January 2022 allowed us to demonstrate the inter-institutional commitment of the Costa Rican entities under the whole-of-government approach and share our plans for the year 2022 involving the investigation of tax crimes. We are honoured to have the experts from Italy's La Guardia di Finanza as a partner administration and thank the OECD and UNDP officials for considering us again in the TIWB-CI programme, as it will help us develop existing and acquire new competencies in tax crime investigations". The working session was deemed a major success, as it involved approximately 30 officials from Costa Rica and Italy and contributed to inter-institutional co-ordination of strategic efforts.
The TFTC, a body of the OECD, also recognises Latin American countries’ leadership in its Advisory Group for Capacity Building. The Advisory Group is chaired by the representatives from the Argentinian Federal Tax Administration (Administración Federal de Ingresos Públicos) and aims to build on the capacity building initiatives of the TFTC, which meets biannually and administrates the OECD Tax Crime Academies, including the Tax Crime Academy for Latin America headquartered in Buenos Aires, Argentina.
Among many activities, the Advisory Group plans to encourage administrations to address their own capacity gaps using TFTC publications and courses, notably the recently published second edition of the Ten Global Principles for Fighting Tax Crime and the e-learning course on the Tax Crime Investigation Maturity Model. This online course was launched by the OECD in January 2022 and guides jurisdictions on how to identify and address their capacity to investigate and prosecute tax crimes. Any jurisdiction interested in completing the training and analysis can register for the course online.
The fight against IFFs is far from over. The multitude of initiatives in Latin America have also revealed a need for increasing policy reforms and improved practices. As aforementioned, one pressing issue is the need for information-sharing, both domestically between agencies working in tax crime and internationally with regional partners.
The public expects tax systems to be just and to sanction actors who seek to undermine the fairness of the system. Further, tax crimes drain resources needed for sustainable development and domestic resource mobilisation. Continuing to fight for this fairness must be a major priority for both Latin America and the international community.