Chile’s Supreme Court Upholds Tax Secrecy Law

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By Tom Azzopardi

Chile’s Supreme Court has rejected a watchdog group’s bid to access confidential tax information, upholding individuals’ rights to privacy.

The Council for Transparency had requested that Chile’s tax authority Servicio de Impuestos Internos (SII) hand over information on taxpayers who had made use of a 2015 tax amnesty program. In the Dec. 5 ruling, the Supreme Court said releasing the information would hurt the government’s ability to collect taxes and would break confidentiality laws.

The process—established under the wide-ranging tax reform Law No. 20,780—invited taxpayers to reveal previously undeclared assets and income held abroad. Individuals would pay a flat 8 percent tax on the assets, but wouldn’t face criminal prosecution. SII officials agreed not to pursue previous taxes due on the assets and to maintain strict confidentiality about the taxpayers involved.

The law even included specific sanctions for SII officials who shared the information with third parties.

The Council on Transparency was created in 2009 and is made up of members appointed by Chile’s president and approved by the Senate. The watchdog receives and processes all information requests, prepare statistics, and provide information about how the country’s laws are applied.

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The Council on Transparency in March 2016 ordered the SII to provide information related to the tax amnesty program after a request by investigative journalists.

After the Santiago Court of Appeals supported the order, the SII said before the Supreme Court that the appeals ruling was illegal, which the three judges have now upheld.

“The ban on providing information to third parties shields not only the privacy, intimacy and reserved nature of personal data from third parties but it can also protect other legal values, such as the effective tax management and fiscal interest in the confidentiality of tax information which it uses as a mechanism to favor voluntary tax compliance and efficient tax raising, regulating relations of help and collaboration with other organs of the state and even with foreign institutions,” the ruling said.

“In summary, in this important ruling, the Supreme Court reaffirmed the validity of the tax secrecy,” the SII said in a statement on Dec. 6.

Complying with the order could also threaten Chile’s position in the Organization for Economic Cooperation and Development’s automatic information exchange program, where the protection of tax information is considered paramount, said Eduardo Torretti, a tax partner at Santiago law firm CorreaGubbins.

“One of the main stumbling blocks for less developed countries to enter the program has been whether they can guarantee confidentiality,” Torretti told Bloomberg Tax on Dec. 7.

To contact the reporter on this story: Tom Azzopardi in Santiago at correspondents@bloomberglaw.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bloombergtax.com

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