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DRAFT LAW NO. 712 /X/4.

DETERMINES THE DEROGATION FROM BANKING SECRECY AS

INSTRUMENT FOR COMBATING TAX FRAUD

Exhibition of reasons

In your Application Programme-and then in the Government Programme-the Party

Socialist committed to defend a rule of lifting bank secrecy

that accompanied "the best European practices" in combating evasion and fraud

tax. A year and a half after having started the activity of the Government, it was

enlightened that "best European practices" would be the rules applied in Belgium

for access to tax information in the cases of complaints in relation to decisions of the

tax administration.

Writing in the Report on the Combat to Fraud and Tax Evasion, January

2006, presented by the Ministry of Finance and Public Administration: " The exposed

does not prevent us, however, from admitting that, on the similarity of the Belgian regime, one can

associate the administrative dispute of tax acts with the necessary access to the

information protected by bank secrecy, in the exact extent to which it is essential to

the administrative decision. Such would be, too, a means of deterring the litigation less

sustained. "

However, an annex to the report, drawn up by the General Directorate of Taxes

(Report "Combat to Fraud and Tax Evasion", January 2006, p.60) featured

a distinct analysis of what are today the "best practices" of access to information

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banking in OECD countries, suggesting a much wider inclusiveness than the

relevant information for the purpose of handling complaints. Says the attached report:

" The legislation of most of the countries authorizes the tax authorities to have

access to banking information, as the exception to the general rule that defines the

confidentiality of such information. "

And it continues:

" Tax authorities can get the banking information from diverse

forms, one of them goes through the automatic declaration of certain type of information

by the Banks. In general, the statement on the interest paid and the

amount of the retentions carried out. Other countries require a declaration with the

relation of open and closed accounts, account balances at the end of the year and

of the interest on the loans. The most important means of obtaining information

banking goes through the specific application to the banking of relative banking elements

to a particular taxpayer. Various countries can obtain information

banking, for tax purposes, without any limit. In other countries the administration

tax, to obtain such information, must use a specific process such

as an administrative injunction or the authorization of a commissioner

independent. "

Following these opinions, the Government presented in the Assembly of the Republic a

proposed law introducing the standard of the Belgian law, requiring the lifting of the secret

banking in the cases of complaints. That law was submitted to the Constitutional Court,

that declared it unconstitutional. This law thus, impaired, was insufficient and deficient,

given that it only covered taxpayers who had complained about decisions of the fisc,

leaving therefore out all those who, having defrauded the fisc, do not have

complained about their decisions.

Then, the government proposed new measures, in the framework of the State Budget for

2009, determining rules of lifting of secrecy in the face of evidence of signs

exterior of wealth.

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Despite these progress, international financial authorities continue to

to consider that the drain on fisc in Portugal will be between the 5 and 10% of the GDP.

Current legislation and its limits

Banking secrecy was legally enshrined in Portugal in 1975, in a period of

major social and institutional changes, through the Organic Law of the Bank of

Portugal, approved by the Decree-Law No. 644/75 of November 15, and strengthened by the

Decree-Law No 729-F/75 of December 22. Various resolutions of the Council of

Ministers go in the same sense, defending the principle of secrecy to ensure the

interest of the citizen (resolution of January 9, 1976). The Decree-Law No. 475/76, of 16

June, establishes the penalty for the breach of secrecy.

From then on, the principle of banking secrecy has always been strengthened: the Decree-Law n.

2/78, of January 9, prohibits the disclosure of bank information as well as the Despacho

Normative No. 357/79, of the Secretary of State of the Treasury. A few years later, the

legislation passes to make exceptions, such as, for example, Law No. 45/86, 1 of

October, which gave powers to the High Authority against Corruption to obtain

information, but it restricted that capacity to what was not covered by duty

secrecy protected by the law-in consequence, there was no investigation that if

could support in banking information.

Latest legislation, such as the one establishing the General Regime of Institutions of

Credit to Financial Societies (Decree-Law No. 298/92 of December 31),

enshrines this duty of absolute secrecy (article 78), although admits after some

exceptions, such as the information due to the Bank of Portugal, to the Commission of the

Securities Market or the Deposit Guarantee Fund. The exception is,

naturally, very significant, for, in addition to the role of control of the banking system

which is incumbent on the Bank of Portugal, this law defines another institution with power of

get all the information you understand relevant: the Stock Market Commission

Real estate, which seeks, with all legitimacy, to fight the inside trading . Ora, for

be able to conduct investigations and obtain evidence against the suspects this Commission, without

recourse to any judicial instance, has access to the information you understand. In a

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word, bank secrecy falls in the face of the need to impose transparency on the market

of capitals.

But this procedure is exceptional and, surprisingly, it is not given to the

tax administration the same capacity that is granted to the Committee on Markets of

Real Estate Values. Thus, both the Code of Procedure and the Tributal Process

(approved by the Decree-Law No. 433/99 of October 26), as the General Tax Act

(passed by Decree-Law No. 398/98, of December 17) keep the reservation of secrecy

absolute in relation to the public administration.

Only in the last few years have measures been adopted that extend the capacity of the

tax administration access to bank information. The Decree-Law No. 6/99, of 8 of

January, sets out the possibility of the fisc requiring information protected by secrecy

bank for the purpose of preparation of tax inspection report. The Law n.

5/2000, shortly after, set standards for breaking professional secrecy in scope

of combating organised crime and economic crime, enabling the

police investigating authorities access to tax information in the face of evidence of

determined typology of crimes. And the most profound legislative change was introduced

with the tax reform of 2000, with the Law No. 30-G/2000, notably when it changes the

General Tax Law, defining the conditions of derogation from the duty of secrecy and the

obligation to submit relevant information for tax research, and when

changes still the Code of Procedure and the Trial Procedure, establishing the

conditions of the special process of derogation, including when there is interposed appeal

by the taxpayer of decision of the tax administration. It is in this Code that the Government

current intended to get a clarification, when it followed the Belgian survey model

of the banking secret in the case of complaints as to the decisions of the tax administration.

Finally, in the Budget Act for 2005 and, more recently, in the OE of 2009, they were

introduced standards that provide for the lifting of secrecy in other cases.

These legislative modifications could and should have profound consequences on the

ability of the administration to combat tax evasion. However, they are still very much

rare cases of waiver of secrecy, in a country where tax evasion is given as

one of the highest in Europe. The latest Report on the Combat to Evasion

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Fiscal announces that in the year transact these rules led to the solicitation of lifting

of the secret in about 1000 cases.

The European rules and the need for access to banking information by the administration

tax

The process of tax harmonization, under way in the European Union, has determined the

lifting of the banking secret, defining rules of exchange of information between the

Member States about the savings deposited by nationals in banks of others

countries. It is assumed that this trend will be strengthened by new measures of combat

coordinated to tax evasion. In particular the approval of the Savings Directive

introduces the obligation of the Portuguese state to inform the tax administration of the others

community countries on the amounts of deposits of their taxpayers in

Portugal, for the purpose of taxation. Paradoxically, the Portuguese fisc, as a rule

general, does not have the power to obtain the information on Portuguese taxpayers, although

can get you in the case of foreign taxpayers.

Given that such an anomaly cannot be extended, the present draft law extends to the

the Portuguese tax authorities the power of access to the banking information that is already

granted by the European Union's legislation to foreign tax authorities in what

relates to deposits in Portuguese financial institutions.

In that sense, it presents the conditions for a lifting of bank secrecy in

function of tax transparency rules. It follows in this matter the reasons pointed out by

Silva Lopes, on June 26, 2000, to reject insufficient measures given that, in a

context of "culture unfavorable to the fisc and tolerance of tax offences",

whenever they are adopted limiting conditions of access to bank information

" very few would be the tax offences that could be detected through access

of the tax administration to bank information " and a system with restrictions

" it would open up possibilities for resources and dilatory maneuvings by taxpayers not

abiding and would provoke negative feedback from abiding contributors ". In

counterpart, argues Silva Lopes, " if the consultation did not depend on any

conditions (particularly of the existence of elements that would make the existence of

tax offences), the taxpayers, both complimentors and non-compliers, would not have

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reasons to complain about tax pursuit ", given the routine and universal character of the

verification. Thus, " the tax administration should be empowered, the similarity of the

which happens in much of the OECD countries, to be obtained from the financial institutions

periodic statements on various categories of data concerning customer accounts ".

They are those recommendations that follow in the present draft law.

In that sense, the present draft law proposes measures to combat evasion and fraud

fiscal policies that are based on the best practices of the countries of Europe and the OECD, and that

are not limited to palliative and reduced-range measures.

This bill proposes a simple, efficient procedure, tuteled by the Minister

of Finance and under its responsibility, which ensures that all citizens are subject

to the same type of control and to the same transparency obligation.

The present draft law states, in this way, that financial institutions are

obliged to provide all relevant information about the deposits and applications

financial transactions processed in the accounts of their customers, and that this information is crossed

with the data from the tax declarations of persons and companies.

Therefore, the proponents of this bill do not advocate that such a survey should have

how to target a specific sector of the population and, much less, a taxpayer

in particular, but which must be a universal and egalitarian method of control of the

tax returns, without any discrimination and therefore in conditions of increasing the

taxpayer trust in relation to the tax administration.

The conditions under which the lifting of bank secrecy in Portugal is imposed

Despite advances and backdrops in the modernization of legislation that sets the secret

banking in Portugal, there are two cases in which unrestricted access of

administrative authorities the personal banking information. It is the candidates for the

Solidarity complement for Elderly and the Social Income Throne: in

both cases, it is the condition of application that all the banking information is

made available without restrictions.

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The reason for this procedure is understandable. It is about ensuring the

verifiability of the application statements. But this same criterion is not applied

in no other social provision or public expense. Ora, if the verification of the data

of the bank account is the most efficient proof of the social and tax situation of a taxpayer,

and for so much required to combat possible abuses in these social benefits, it is

incomprehensible that this method cannot be used by the fisc as a general rule.

There is therefore a class discrimination in the lifting of bank secrecy.

So, and in the constitutional and regimental terms, the Deputies of the Left Bloc

present the following draft law:

Article 1.

(Subject)

This Law creates mechanisms for access by the State to relevant information about

operations of deposits and financial or similar applications held at the institutions

financial, for exclusive effect of combating evasion and tax fraud.

Article 2.

(Changes the general regime of credit institutions and financial companies)

The general scheme of credit institutions and financial companies, instituted by the

Decree-Law No. 298/92 of December 31, is amended in its Article 79, of the following

shape:

" Article 79.

(...)

1-(...)

2-(...)

a) (...)

b) (...)

c) (...)

d) (...)

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e) to the Ministry that guardianship the tax administration, in the framework of its activity of

monitoring of the compatibility between the movements and operations of the institutions

financial and the tax returns of taxpayers;

f) (previous point (e)) "

Article 3.

(Access to information covered by bank secrecy)

Article 63-B of the General Tax Act, adopted by the Decree-Law No. 398/98, of 17 of

December, it shall be replaced by the following:

" Article 63-B

(...)

1-A tax administration has the power to access all information or

relevant banking documents without dependence on the consent of the holder of the

protected elements, where the request to credit institutions, societies

financial and too many entities for the exclusive effect of the compatibility check

between the totals of deposits and applications and the total declared income for

effects of calculation of the income tax of natural persons.

2-For the purposes of the preceding paragraph, the information or

banking documents referring to the operations of deposits and transfers to the

accounts and results of financial applications of taxpayers, excluding orders

of payment and other expenses of the taxpayer and still the information provided by the

client of the banking institution to justify the recourse to credit.

3-The requests for information referred to in paragraph 1 shall be the competence of the Director

general of Taxes or the Director General of Customs and Special Taxes of

Consumption, or your legal substitutes.

4-Compete to the Ministry that guardianship the tax administration to determine, by portaria,

the rules for processing the information to which the previous figures are referred to, well

how from the application of the professional secret that is required in the treatment of that

information.

5-Failure to comply with the obligations set out in this article shall not be founded on

banking secrecy. "

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Article 4.

(Regulation)

The Government shall regulate this Act within 90 days.

Article 5.

(Entry into force)

The Act shall come into force on the day following that of its publication.

The deputies and the Members of the Left Bloc,