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Guatemala's Top Court Grants Tax Authority Access to Bank Data

Posted on Aug. 12, 2019

Guatemala’s Constitutional Court has lifted its provisional suspension of amendments to the country’s banking laws that give the tax authority access to banking information, a stumbling block that led to a “noncompliant” OECD transparency rating.

In a decision dated August 5 and sent to Tax Notes August 9, the Court threw out a challenge from a taxpayer against article 30 C of the Tax Code, which was added by article 52 of Decree 37-2016 of the Congress. The amendments, which were enacted in 2016, allow the Superintendency of Tax Administration (SAT) to obtain banking information for tax purposes, but the taxpayer contested the changes, arguing they were unconstitutional, and they were provisionally suspended in August 2018.

In its decision, the Court held that most of the arguments on which the challenge rested were improperly applied for this type of action, explaining that the examination the plaintiff intended was legally unfeasible. The Court also held that the SAT should limit its request for information to cases in which there are reasonable doubts about activities or operations that merit an investigation. The Court said that as an administrative authority, the SAT has a responsibility to stay within the bounds of the law.

The Court also imposed a fine of GTQ 1,000 (about $127) on the attorneys that brought the case under article 148 of the Law on Amparo, Personal Exhibition, and Constitutionality, which permits a fine when unconstitutionality is declared without grounds.

The Ministry of Public Finance praised the decision in an August 8 statement, saying the move could lead to an improved OECD tax transparency rating. The government said it would immediately notify the OECD and ensure that the tax administration will comply with the Court’s decision.

The provisional suspension was a key factor in the decision of the OECD Global Forum on Transparency and Exchange of Information for Tax Purposes to give Guatemala a noncompliant rating in its latest round of peer reviews published July 30. The reviews evaluated jurisdictions’ adherence to the international standard on exchange of information on request (EOIR), taking into account beneficial ownership availability in line with the Financial Action Task Force’s international standard.

The global forum had identified the Guatemalan tax authorities’ lack of access to banking information for EOIR purposes as a concern in 2012 when it evaluated the country for its implementation of the EOIR standard in the first phase of the first peer review process, which assesses a country’s legal framework.

Consequently, Guatemala could not be assessed in the second phase of the review process, which examines practical implementation of the standard. A 2015 phase 1 supplementary report, which considers any improvements made by a jurisdiction since its initial peer review, yielded the same result.

After Guatemala amended the law to allow tax authorities to participate in EOIR, the global forum gave Guatemala a provisional “largely compliant” rating under a fast-track review process to help countries avoid landing on the OECD’s noncooperative jurisdiction blacklist based on criteria established by the G-20. But because of the provisional suspension of the law, the global forum had to give Guatemala an overall noncompliant rating in 2019.

A noncompliant rating could land Guatemala on the OECD/G-20 noncooperative jurisdictions list based on the updated objective criteria that OECD Secretary-General Angel Gurría presented to the G-20 in July 2018. These criteria are a largely compliant rating under the EOIR standard in the global forum’s second round of peer reviews; satisfactory implementation of the automatic exchange of information standard; and either having the multilateral convention in force or having a sufficient network of bilateral agreements to allow both EOIR and automatic information exchange.

To avoid being listed, a jurisdiction must comply with two out of three criteria. However, jurisdictions that have a noncompliant rating for the EOIR standard or have failed to implement the automatic exchange of information standard by 2018 will automatically be placed on the noncooperative jurisdiction list.

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