THE EXPANSION AND INTERNATIONALIZATION OF 

MANDATORY DISCLOSURE RULES 
 

 

Noam Noked, Zachary Marcone & Alison Tsang* 

 

 

Abstract 

 

The Panama Papers, the Paradise Papers, and most recently the Pandora 

Papers have exposed the role of tax advisors, lawyers, financial institutions, and 

other intermediaries in enabling cross-border tax avoidance and evasion. In 

response, mandatory disclosure rules (MDRs), which require that intermediaries 

report their clients’ tax schemes, are becoming prominent tools in the international 

fight against tax avoidance and evasion. This Article analyzes the development of 

MDRs over the past four decades as a global phenomenon with three distinct 

phases beginning in the 1980s. The analysis reveals several trends: expansion in 

the types of schemes that are reportable, extension of reporting obligations to a 

great diversity of intermediaries, and increasing multilateralism in the effort to 

curb intermediary-enabled tax avoidance and evasion. This Article shows how 

developments in international tax policy have affected, and will likely continue to 

affect, the expansion and internationalization of MDRs. 

 

 

  

 
* Noam Noked is an Assistant Professor at the Faculty of Law of the Chinese University of 

Hong Kong. Zachary Marcone is a Fulbright Scholar at Uganda Christian University; he co-authored 

this Article while he worked as a Research Assistant at the Faculty of Law of the Chinese University 

of Hong Kong. Alison Tsang is a Tax Associate at the Hong Kong office of Baker & McKenzie. 

The work described in this article was fully supported by a grant from the Research Grants Council 

of the Hong Kong Special Administrative Region, China (Project No. CUHK 14612220).  



2022] MANDATORY DISCLOSURE RULES 123 
 

 

 

INTRODUCTION .............................................................................................. 124 

I. FIRST GENERATION: 1980S ..................................................................... 128 

     A. United States ............................................................................... 129 

     B. Canada......................................................................................... 132 

II. SECOND GENERATION: 2000S AND EARLY 2010S ................................. 133 

     A. United States ............................................................................... 134 

     B. United Kingdom.......................................................................... 137 

     C. Other Countries ........................................................................... 140 

III. THIRD GENERATION: 2015-PRESENT ................................................... 143 

     A. DAC 6 ......................................................................................... 143 

     B. CRS MDRs ................................................................................. 149 

     C. Other Countries ........................................................................... 152 

IV. TRENDS IN THE DEVELOPMENT OF MDRS ........................................... 153 

     A. Expansion of What Should Be Reported .................................... 154 

     B. Expansion of Who Should Report .............................................. 155 

     C. Internationalization of MDRs ..................................................... 159 

V. THE PATH AHEAD FOR MDRS .............................................................. 161 

CONCLUSION.................................................................................................. 163 

 

  



124 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

INTRODUCTION 

 

When Nigerian mega-preacher David Oyedepo decided to set up an 

offshore company, he turned to the Bible for inspiration. Oyedepo, the owner of a 

fortune valued at $150 million by Forbes magazine, named his British Virgin 

Islands company “Zadok Investments Limited,” after King David’s loyal priest 

Zadok who helped suppress rebellion and restore peace in the kingdom.1 Modern 

“kings” no longer rely on the services of priestly advisors; a new class of 

professional advisors have taken their place. Oyedepo, like others in the global 

economic elite, turned instead to financial and legal professionals to help maintain 

his assets under an offshore structure, raising concerns of tax avoidance and 

evasion.2 The relationship of Oyedepo and others with these intermediaries was 

revealed in the Pandora Papers, the most recent of a series of leaks over the past 

decade.3 These revelations have highlighted the continuing role of intermediaries 

in enabling tax avoidance and evasion that has been successively brought to light 

in the Panama Papers, the Paradise Papers, and now the Pandora Papers.4 

To combat intermediary-enabled tax avoidance and evasion, many 

governments have adopted or are in the process of adopting mandatory disclosure 

rules (MDRs) as deterrence and information-gathering tools. In general, MDRs 

require the disclosure of certain schemes that may facilitate tax avoidance and 

evasion.5 The reporting obligations typically apply to the promoters of reportable 

schemes and other intermediaries who assist with the design and implementation 

of such schemes.6 MDRs are designed to deter intermediaries from developing and 

implementing schemes that could facilitate tax avoidance and evasion, identify the 

 
1 Nicholas Ibekwe, Pandora Papers: How Bishop David Oyedepo Set Up Family Offshore 

Company in Tax Haven, PREMIUM TIMES, Oct. 10, 2021, https://www.premium 

timesng.com/news/headlines/489110-pandora-papers-how-bishop-david-oyedepo-set-up-family-

offshore-company-in-tax-haven.html [https://perma.cc/X2DK-HU8B]; Mfonobong Nsehe, The 

Five Richest Pastors in Nigeria, FORBES, June 2, 2011, https://www.forbes.com/ 

sites/mfonobongnsehe/2011/06/07/the-five-richest-pastors-in-nigeria [https://perma.cc/8F68-

N32W]. 
2 See id. 
3 See id.; Greg Miller et al., Billions Hidden Beyond Reach, WASH. POST, Oct. 3, 2021, 

https://www.washingtonpost.com/business/interactive/2021/pandora-papers-offshore-finance 

[https://perma.cc/NUF4-5Q3L]. 
4 For further discussion, see BASTION OBERMAYER & FREDERIK OBERMAIER, THE PANAMA 

PAPERS: BREAKING THE STORY OF HOW THE RICH AND POWERFUL HIDE THEIR MONEY (2016); 

Lawrence J. Trautman, Following the Money: Lessons from the Panama Papers: Part 1: Tip of the 

Iceberg, 121 PENN ST. L. REV. 807 (2017); Shu-Yi Oei & Diane Ring, Leak-Driven Law, 65 UCLA 

L. REV. 532 (2018); James O’Donovan et al., The Value of Offshore Secrets: Evidence from the 

Panama Papers, 32 REV. FIN. STUD. 4117 (2019); International Consortium of Investigative 

Journalists, Pandora Papers, https://www.icij.org/investigations/pandora-papers 

[https://perma.cc/PB3G-QZ5V] (last visited Oct. 13, 2021). 
5 As discussed below, many MDRs target tax avoidance schemes. Certain MDRs, such as the 

CRS MDRs discussed in infra Part III.B., target arrangements that raise concerns of tax evasion. 

See infra note 190 for further discussion on tax avoidance and evasion in this context. 
6 As discussed below, this Article focuses on MDRs that impose reporting obligations on parties 

other than the taxpayers themselves (i.e., third-party reporting by intermediaries). Reporting 

obligations that only apply to the taxpayers are outside the scope of this Article.  



2022] MANDATORY DISCLOSURE RULES 125 
 

 

users of such schemes, and alert tax authorities of weaknesses in the tax system.7 

MDRs have developed from targeted domestic measures against promoters 

of mass-marketed tax shelters into substantially broader reporting standards that 

constitute a major component of a coordinated international campaign against tax 

avoidance and evasion.8 From humble origins, MDRs have taken the world by 

storm in recent years with the implementation of the EU Council Directive 

2018/822 (DAC 6) and the publication of the OECD Model MDRs for Common 

Reporting Standard avoidance (CRS MDRs).9 Over 30 jurisdictions have adopted 

new forms of MDRs since 2018 alone, and there are indications that more countries 

will follow suit.10 These developments are part of broader trends in international 

tax policy and enforcement that have increased efforts to curb tax avoidance and 

evasion, shift the spotlight to the enablers of tax avoidance and evasion, and adopt 

a multilateral approach to tax norm-setting and enforcement.11 

This Article is the first publication to thoroughly explore the development 

of MDRs over time in different jurisdictions. While there exists literature 

discussing specific regimes, this is the first publication to identify and analyze 

trends across the full temporal and geographic breadth of MDRs.12 The analysis of 

the development of MDRs exposes trends in the evolution, maturation, and 

implementation of MDRs over time with a cross-jurisdictional lens. This Article 

shows how the trends in the evolution of MDRs fit into broader movements in 

international tax policy. 

The evolution of MDRs can be divided into three distinct generations: the 

tax shelter registration rules of the 1980s, which were limited in scope and purpose; 

the reportable transaction disclosure regimes of the 2000s, which expanded 

reporting requirements and made some inroads into the international taxation 

sphere; and finally, the multilateral MDRs of the past six years, which extend 

reporting requirements to a great diversity of intermediaries, focus on cross-border 

arrangements, and create information exchange systems.  

 
7 See Michael Schler, Effects of Anti-Tax-Shelter Rules on Nonshelter Tax Practice, 109 TAX 

NOTES 915, 917 (2005). See also the discussion in Parts I and II for the reasons countries have 

adopted MDRs. 
8 See infra Parts I-III (showing how the development and adoption of MDRs in different 

countries have built upon the experience of other countries’ earlier MDRs).  
9 Council Directive 2018/822, 2018 O.J. (L 139) [hereinafter DAC 6]; OECD, Model 

Mandatory Disclosure Rules for CRS Avoidance and Opaque Offshore Structures (2018) 

[hereinafter CRS MDRs]. In general, DAC 6 requires the disclosure of certain schemes and 

arrangements by intermediaries, such as tax professionals, lawyers, investment advisors, 

accountants, and other service providers. See infra Part III.A. The CRS MDRs require the reporting 

of schemes that enable the avoidance of CRS reporting. See infra Part III.B. 
10 Mexico, Argentina, the United Kingdom, and all 27 Member States of the EU have adopted 

some form of expanded MDRs since 2018. Guernsey, Jersey, the Isle of Man, and Gibraltar are also 

in the process of adopting the CRS MDRs. See infra Part III. Several countries, including Australia 

and Japan, are also currently considering adopting MDRs. See infra Part V. 
11 See infra Part IV; Ruth Mason, The Transformation of International Tax, 114 AM. J. INT’L 

L. 353 (2020) (discussing the implications of recent international tax reforms and the changes in the 

participants, agenda, institutions, and legal instruments of international tax).  
12 Publications on specific regimes are cited throughout this Article.  



126 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

In the 1980s, the United States and Canada adopted targeted measures 

requiring the registration of mass-marketed individual tax shelters.13 These early 

reporting regimes required the promoters of individual tax shelters to report any tax 

schemes which matched a set of narrow criteria.14 Promoters were required to 

provide information on the schemes to the tax authority which would then issue an 

identification number for taxpayers to include in their tax returns.15 In some cases, 

promoters were required to maintain lists of investors’ contact information and 

provide this information to the tax authorities.16 

In the 2000s, the United States enacted rules requiring the reporting of 

certain “reportable transactions” that may be associated with tax avoidance.17 The 

new U.S. regime required the reporting of “listed transactions” and other 

transactions that contained certain identifiable hallmarks.18 These measures 

expanded the breadth of the pre-existing tax shelter registration rules to include 

other tax avoidance schemes, particularly those involving corporate taxpayers. In 

addition, this regime expanded the reporting obligations beyond organizers of tax 

shelters to further include any material advisors who provide tax statements with 

respect to a reportable transaction.19 Following the United States, the United 

Kingdom adopted a similar, but structurally different, reportable transaction 

disclosure regime in 2004.20 Subsequently, additional countries, including South 

Africa, Portugal, Ireland, and Canada, adopted regimes modeled after either the 

United States’ or the United Kingdom’s MDRs.21 

The most dramatic expansion of MDRs is now underway. The OECD, as 

part of the Base Erosion and Profit Shifting (BEPS) project, suggested in 2015 that 

countries adopt broad MDRs as part of an international effort to curb cross-border 

tax avoidance.22 Following this recommendation, the EU adopted in 2018 its own 

form of MDRs under DAC 6.23 DAC 6 substantially expands reporting obligations, 

focuses on cross-border arrangements, includes hallmarks for CRS avoidance, and 

facilitates the exchange of information between Member States.24 Furthermore, 

DAC 6 requires reporting from any intermediary that could reasonably be expected 

to be aware of a reportable transaction.25 This expansion is significant because it 

imposes reporting obligations on various intermediaries even if such parties did not 

advise or make statements on the tax aspects of the transaction. Such intermediaries 

 
13 See infra Part I. 
14 See infra notes 58, 72 and the accompanying text. 
15 See infra Part I. 
16 See infra notes 56, 74 and the accompanying text. 
17 See infra Part II.A. 
18 Id. 
19 See id. 
20 See Finance Act 2004 c.12, §§ 306-19 (UK) https://www.legislation.gov.uk/ukpga/ 

2004/12/contents [https://perma.cc/8PW9-7BYZ] and its implementing regulations. See also infra 

note 110. 
21 See infra Part II.C. 
22 See OECD, MANDATORY DISCLOSURE RULES, ACTION 12-2015 FINAL REPORT (2015) 

[hereinafter Action 12]. 
23 See DAC 6, supra note 9. 
24 See id.; see also infra Part III.A. 
25 See infra note 169 and the accompanying text. 



2022] MANDATORY DISCLOSURE RULES 127 
 

 

may include lawyers, investment advisors, corporate service providers, trustees, 

and other professionals. In addition, the OECD published in 2018 the CRS MDRs, 

which provide a system of mandatory disclosure for CRS avoidance arrangements 

and opaque offshore structures. CRS MDRs, like DAC 6, lay the groundwork for a 

system of automatic information exchange between jurisdictions.26 A growing 

number of countries have adopted or are expected to adopt the CRS MDRs.27 New 

MDRs have also emerged in other parts of the world.28 

Our analysis of the development of MDRs reveals three trends.29 First, 

MDRs have gradually expanded from targeted measures against certain specific 

transactions to comprehensive reporting regimes for different types of aggressive 

tax planning.30 Overall, this represents a transition from a narrow rule-based 

approach targeting specific tax shelters to a broader standard-based approach to 

counter various forms of tax avoidance and evasion.31 This standard-based 

approach is reflected in the extensive use of generic hallmarks and the incorporation 

of the main benefit test in newer MDRs.32 This trend is part of an increasing 

international effort to curb tax avoidance and evasion.33 

Second, MDRs have expanded the categories of persons obligated to report. 

The original tax shelter registration rules specifically targeted the promoters and 

organizers of mass-marketed tax shelters. The most recent MDRs require a broad 

set of intermediaries to report even if they are not involved with the tax aspects of 

a transaction or an arrangement. Thus, MDRs have evolved from targeting a small 

group of tax shelter promoters to regulating a broad set of professional service 

industries. These changes also align with general trends in tax policymaking and 

enforcement that target the enablers of tax avoidance and evasion.34 

Third, MDRs have changed from domestic measures with a domestic focus 

to multilateral standards addressing cross-border tax avoidance and evasion.35 The 

internationalization of MDRs has affected what needs to be reported, who needs to 

report, and how information is exchanged between jurisdictions. DAC 6 and CRS 

MDRs are transnational by design. They incorporate hallmarks that target cross-

border transactions and arrangements, require both domestic intermediaries and 

 
26 See OECD, INTERNATIONAL EXCHANGE FRAMEWORK FOR MANDATORY DISCLOSURE RULES 

ON CRS AVOIDANCE ARRANGEMENTS AND OPAQUE OFFSHORE STRUCTURES (2019).  
27 See the discussion in infra Parts III.B, V.  
28 See infra Part III.C. 
29 See infra Part IV. 
30 See infra Part IV.A. 
31 See infra note 239 and the accompanying text. 
32 See infra notes 166, 177-179, 241 and the accompanying text.  
33 Relevant international developments include BEPS, BEPS 2.0, the Foreign Account Tax 

Compliance Act (FATCA), and the Common Reporting Standard (CRS). In general, BEPS and 

BEPS 2.0 are coordinated international programs led by the OECD which aim to end tax avoidance, 

in particular by multinational enterprises. FATCA is a U.S. law that requires the reporting of the 

overseas financial assets of U.S. citizens and tax residents to the U.S. government. CRS is an 

international version of FATCA, implemented by more than 112 jurisdictions, which facilitates the 

automatic exchange of financial account information of foreign tax residents to their jurisdictions 

of tax residence. See infra notes 191-193, 293 and the accompanying text. See also the discussion 

infra Part IV.C. 
34 See infra Part IV.B. 
35 See infra Part IV.C. 



128 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

intermediaries in other jurisdictions to report, and contain systems for information 

exchange between countries. This is in line with other recent developments in 

international taxation, such as CRS, BEPS, and BEPS 2.0, which adopt an 

international and multilateral approach in the fight against cross-border tax 

avoidance and evasion.36 

These expanded models for MDRs may spread to more countries and 

become new international tax norms.37 There could be pressure, in the form of EU 

blacklisting or OECD peer reviews, on jurisdictions across the globe to implement 

some form of MDRs such as the CRS MDRs. Interestingly, although the United 

States played a key role in introducing and expanding MDRs in the 1980s and 

2000s, U.S. policymakers have not expressed interest in adopting more expansive 

rules like their European counterparts have. Understanding the development of 

MDRs can contribute to current policy discussions around the world on whether to 

adopt MDRs or expand existing MDRs. 

This Article is divided into five parts. Part I discusses the targeted U.S. and 

Canadian tax shelter registration rules of the 1980s. Part II analyzes the reportable 

transaction regimes of the 2000s and early 2010s, which significantly expanded in 

scope, but largely remained domestically focused. Part III evaluates the major 

expansion and internationalization of the scope and focus of MDRs since 2015. Part 

IV reveals trends across the three generations and contextualizes them within 

broader movements in international tax policy. Part V provides observations and 

comments regarding the possible directions of MDRs in the future. 

 

I. FIRST GENERATION: 1980S 

 

The first rules that imposed obligations on intermediaries to report tax 

schemes were the tax shelter registration rules of the 1980s. Tax shelter registration 

rules were first introduced in the United States in 1984 and then in Canada in 

1988.38 The scope and aim of these rules were much narrower than those of the 

MDRs adopted in later decades, as discussed in the next parts. These rules targeted 

certain types of individual tax shelters that had proliferated in the United States and 

Canada in the 1970s and early 1980s.39 Unlike the regimes of later decades, these 

rules lacked a list of general hallmarks that flag transactions for reporting.40 

Furthermore, these rules did not address corporate tax shelters which would 

eventually pose significant tax avoidance challenges.41 

 
36 See infra Part IV.C. 
37 See infra Part V. 
38 For the United States, see Deficit Reduction Act of 1984 §§ 141-144 Pub. L. 98-369 (1984) 

[hereinafter DEFRA], which first introduced the provisions requiring “organizers” of tax shelters to 

register “tax shelters” and to maintain investor lists for each tax shelter, and penalties for non-

compliance, in I.R.C. §§ 6111, 6112, 6707, 6708 (of 1986) (it has been replaced by the U.S. 

reportable transaction disclosure rules, discussed infra Part II.A). For Canada, see Income Tax Act, 

R.S.C. 1985 (Can.) [hereinafter Canadian ITA], c.1, s 237.1 (of 1988) (it has since been amended 

by Canada’s subsequent MDRs as discussed in Part II.B). 
39 See Mortimer Caplin, Tax Shelter Disputes and Litigation with the Internal Revenue Service 

- 1987 Style, 6 VA. TAX REV. 709, 709 (1987). 
40 See infra Part II. 
41 See id. 



2022] MANDATORY DISCLOSURE RULES 129 
 

 

 

A. United States 

 

The United States adopted its tax shelter registration rules in 1984 in 

response to a proliferation of mass-marketed tax shelters.42 The use of such tax 

shelters had been increasing steadily since the 1960s, which contributed to the 

mounting federal deficit in the 1980s.43 Although Congress had enacted various 

forms of legislation to combat such tax shelters,44 these measures did little to curb 

the growing use of such schemes.45 In 1982, recognizing that the problem largely 

stemmed from promoters of tax shelters, who had been marketing shelters based on 

false representations, gross valuation overstatements, and unsupported positions, 

Congress introduced promoter penalty provisions, as well as provisions allowing 

for injunctive relief to be sought against promoters, to tackle the issue “at [its] 

source.”46 

However, abusive tax shelters continued to proliferate.47 This led to 

concerns that promoters were profiting from the U.S. Treasury’s dearth of 

information on the tax shelter market and that the IRS was unable to “examine 

effectively every return” to detect participation in tax shelters.48 As a result, 

Congress introduced tax shelter registration rules in 1984.49 The purpose of these 

rules was to facilitate the IRS’ ability to identify abusive tax shelters early and to 

make “better informed judgments” when deciding whether or not to audit a 

scheme.50 These rules were part of a larger package of changes implemented in the 

Deficit Reduction Act of 1984.51 Congress was concerned that tax shelters 

exacerbated the deficit, undermined public trust in the tax system, and inhibited 

economic growth by diverting funds away from more profitable investments.52 

 
42 See J. COMM. ON TAX’N, 98TH CONGRESS, GENERAL EXPLANATION OF THE REVENUE 

PROVISIONS OF THE DEFICIT REDUCTION ACT OF 1984, JCS-41-84, at 7 (1984) (“Congress believed 

that the proliferation of tax shelters had seriously eroded the tax base . . . The increase in tax shelter 

activity had aggrevated [sic] the nation’s deficit problem.”). 
43 See id.; see also S. COMM. ON FINANCE, 98TH CONG., DEFICIT REDUCTION ACT OF 1984 – 

EXPLANATION OF PROVISIONS APPROVED BY THE COMMITTEE ON MARCH 21, 1984, at 81, 83 

(Comm. Print 1984); DEP’T TREASURY, TAX REFORM FOR FAIRNESS, SIMPLICITY, AND ECONOMIC 

GROWTH – THE TREASURY DEPARTMENT REPORT TO THE PRESIDENT 6, 7, 138, 139, 140 (1984).  
44 See Tax Reform Act of 1969, Pub. L. No. 91-172 (1969); Tax Reform Act of 1976, Pub. L. 

No. 94-455 (1976); Revenue Act of 1978, Pub. L. No. 95-600 (1978); Economic Recovery Tax Act 

of 1981, Pub. L. No. 97-34 (1981). 
45 See J. COMM. ON TAXATION, GENERAL EXPLANATION OF THE REVENUE PROVISIONS OF THE 

TAX EQUITY AND FISCAL RESPONSIBILITY ACT OF 1982, JCS-38-82, at 210-11 (1982). 
46 This is an early example of the tax authorities targeting the enablers of tax avoidance as 

opposed to the taxpayers themselves. The provisions were introduced under the Tax Equity and 

Fiscal Responsibility Act of 1982, Pub. L. No. 97-248 (1982) [hereinafter TEFRA]. See id. at 210-

13 for the legislative background of TEFRA. 
47 See J. COMM. ON TAX’N, supra note 42. 
48 Id. at 475; Marilyn A. Wethekam, A Critique of Current State Tax Shelter Laws, The State 

and Local Tax Lawyer, 11 STATE & LOC. TAX L. 37 (2006). 
49 See DEFRA §§ 141-44. 
50 See J. COMM. ON TAX’N, supra note 42, at 476. 
51 DEFRA, supra note 49. 
52 See J. COMM. ON TAX’N, supra note 42, at 5-8. 



130 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

To address these concerns, the Deficit Reduction Act of 1984 required tax 

shelter organizers to register no later than the first day on which their interest was 

offered for sale.53 Organizers would then receive a registration number which 

investors were required to include in their personal tax returns.54 Registration 

required the disclosure of information about the tax shelter to the IRS.55 

Additionally, any organizers of “potentially abusive tax shelters” were required to 

maintain lists of investors with their respective personal information.56 Upon 

request, organizers were required to provide these lists to the IRS.57 

The Deficit Reduction Act defined a tax shelter based on a formula. A tax 

shelter was defined as any investment that “any person could reasonably infer” the 

ratio of deductions and 200 percent of credits to the cash invested, the so-called 

“tax shelter ratio,” was greater than two to one as of the close of any of the first five 

years of the investment.58 However, this definition proved too broad and required 

the registration of a significant number of investments with no tax avoidance 

motives.59 Not only did this place unnecessary burden on promoters and investors 

in legitimate investment schemes, but would also complicate the IRS’ ability to 

identify and investigate abusive tax shelters.60 In August 1984, the U.S. Treasury 

exempted from reporting certain types of investments that posed a lower risk of 

being considered as abusive.61 

The early registration requirement imposed on organizers provided the IRS 

with a tool to identify abusive tax shelters before any government revenue was lost. 

By requiring tax shelters to register on the day they first sell their products, the IRS 

 
53 The tax shelter organizer was “the person principally responsible for organizing the tax 

shelter.” DEFRA § 141. The promoter of the scheme generally qualified as the organizer. See J. 

COMM. ON TAX’N, supra note 42, at 476. Promoters are understood in this Article to mean those 

who market and sell tax products. 
54 See DEFRA § 141; see also J. COMM. ON TAX’N, supra note 42, at 476 for a further discussion 

on this provision and others. 
55 DEFRA required the following to be included in the registration, “(A) information identifying 

and describing the tax shelter, (B) information describing the tax benefits of the tax shelter 

represented (or to be represented) to investors, and (C) such other information as the Secretary may 

prescribe.” DEFRA § 141. 
56 The law defined a potentially abusive tax shelter as “(1) any tax shelter (as defined in section 

6111) with respect to which registration is required under section 6111, and (2) any entity, 

investment plan or arrangement, or other plan or arrangement which is of a type which the Secretary 

determines by regulations as having a potential for tax avoidance or evasion.” DEFRA § 142. 
57 See id. 
58 For example, suppose a partnership purchases an office building and is subject to annual 

interest payments of $1,000,000 on a mortgage. Other expenses total $400,000. The partnership has 

100 investors who invest $2,000 each in the first year for a total investment of $200,000. In this case 

the tax shelter ratio would be 
$1,400,000+200∗0

$200,000
= 7. For a more detailed breakdown of a similar 

example, see Stephen Saporta, Tax Shelter Registration: An Alternative Proposal That Leads to the 

Efficient Identification of Abusive Tax Shelters, 20 VAL. U. L. REV. 489, 521-25 (1986). The tax 

shelter ratio was later changed to 350% of credits in the Tax Reform Act of 1986 to account for 

altered tax rates. See Tax Reform Act of 1986 § 1531, 26 U.S.C. § 1 (1986). 
59 See Saporta, supra note 58, at 512, 517. 
60 See id. at 517. 
61 This exception applied to what was referred to as “projected income investments.” Temp. 

Treas. Reg. § 301.6111-1T, Q&A 57A, 57B (1985).  



2022] MANDATORY DISCLOSURE RULES 131 
 

 

could begin investigating potentially abusive tax shelters earlier than before. The 

IRS could then send pre-filing notification letters to investors to warn them of an 

abusive tax shelter scheme before any investors had actually used the shelter to 

deny the government its due revenue.62 Previously, taxpayers investing in these 

shelters could play the audit lottery and hope that the IRS’ lack of comprehensive 

data would shield them from consequences.63 The information obtained also 

allowed the U.S. Treasury to identify the legislative loopholes commonly exploited 

in tax shelter arrangements, which eventually led Congress to enact the Tax Reform 

Act of 1986. The Tax Reform Act of 1986 raised penalties for failing to comply 

with many of the requirements of the 1984 act including a failure to register as a 

tax shelter.64 The 1986 tax reform also implemented other tax measures that 

reduced the attractiveness of tax shelters.65 These measures in combination with the 

anti-tax shelter changes of 1984 were effective in suppressing the mass-marketed 

individual tax shelter industry.66  

The number of individual tax shelters declined after 1986.67 It is not entirely 

clear how much of this decline resulted directly from the tax shelter registration 

rules. A Government Accountability Office (GAO) report from 1988 found that the 

tax shelter registration program could be improved.68 Some analysts have argued 

 
62 See Michael J. Bradley, Registration of Tax Shelters, 63 TAXES 563, 565 (1985) (“The IRS 

decided that the only way to stop the proliferation was to identify potentially abusive tax shelters 

and warn gullible investors before the investments were sold, rather than attacking the transactions 

retrospectively . . . . This is done by issuing ‘pre-filing notification letters’ to investors, warning 

them of the potential pitfalls.”). For further information on pre-filing notifications, see Rev. Proc. 

83-78, 1983-2 C.B. 595; Rev. Proc. 84-84, 1984-2 C.B. 782; Caplin, supra note 39, at 734; Allan 

Karnes & Roger Lively, Striking Back at the IRS: Using Internal Revenue Code Provisions to 

Redress Unauthorized Disclosures of Tax Returns or Return Information, 23 SETON HALL L. REV. 

924 (1993). 
63 For further discussion, see J. COMM. ON TAX'N, supra note 45, at 216, wherein the problem 

of the audit lottery is lamented and the reasons for its persistence at the time are elaborated. For a 

general discussion on the audit lottery problems, see Yoram Keinan, Playing the Audit Lottery: The 

Role of Penalties in the U.S. Tax Law in the Aftermath of Long Term Capital Holdings v. United 

States, 3 BERKELEY BUS. L.J. 381 (2006); Matthew C. Ames, Formal Opinion 352: Professional 

Integrity and the Tax Audit Lottery, 1 GEO. J. LEGAL ETHICS 411 (1987); Elena Eracleous, Losing 

the Audit Lottery: Corporate Tax Shelters and Judicial Doctrine, 5 FORDHAM J. CORP. & FIN. L. 

205 (2000); Joel S. Newman, The Audit Lottery: Don’t Ask, Don’t Tell?, 40 TAX NOTES 1438 

(1988). 
64 See Tax Reform Act of 1986, supra note 58, at §§ 1532-1534 (amending I.R.C. §§ 6707-

6708). 
65 These measures included the passive activity loss rules (PAL) which required that passive 

losses could only be used to offset other passive income. See Tax Reform Act of 1986, supra note 

58, at § 501 (amending I.R.C. § 469). 
66 See DEP’T TREASURY, THE PROBLEM OF CORPORATE TAX SHELTERS – DISCUSSION, 

ANALYSIS AND LEGISLATIVE PROPOSALS 27, 60, 64 (July 1999); J. COMM. ON TAX’N, supra note 

42, at 426. 
67 See George K. Yin, Getting Serious about Corporate Tax Shelters: Taking a Lesson from 

History, 54 SMU L. REV. 209, 211 (2001), for a detailed quantitative analysis of the decline in tax 

shelters post-1986. 
68 U.S. GOV’T ACCOUNTABILITY OFF., GAO-88-69, TAX ADMINISTRATION: IRS’ ABUSIVE TAX 

SHELTER EFFORTS NEED IMPROVEMENT 3, 15-16, 19 (1988). The report found that in the three 

districts visited by the GAO not a single registered tax shelter had been penalized for abusive 

 



132 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

that other tax measures introduced in the 1986 tax reform played a substantial role 

in eliminating the tax shelter problem.69 The decline in individual tax shelters after 

1986 may be the result of the combined effect of the tax shelter registration rules 

and other tax measures. Also, the implementation of tax shelter registration rules in 

the United States prompted another country, Canada, to adopt similar rules just a 

few years later. 

 

B. Canada 

 

Canada introduced similar tax shelter registration rules in 1988 as part of a 

comprehensive package of reforms to curtail the “accelerating proliferation of tax 

avoidance schemes.”70 These new rules were inspired by the recent tax changes in 

the United States.71 Canada’s tax shelter registration rules were generally similar to 

the rules in the United States.  

Under Canada’s tax shelter registration rules, a scheme was classified as a 

“tax shelter” based on a formula.72 Promoters were required to register a tax shelter 

 
behavior between October 1984 and July 1986, despite 20 completed investigations. IRS personnel 

reported that this was due to a lack of relevant information reported in the registration process. The 

personnel argued that obtaining a tax shelter’s prospectus and offering documents at the time of 

registration would make it easier for them to get information on the shelter’s income projections, its 

asset acquisition and financing, and the types of deductions or credits it used. This would have 

helped the IRS determine the extent to which the investment is tax-motivated and allow them to 

verify the accuracy of the registration information. 
69 See Yin, supra note 67, at 219; Calvin H. Johnson, Why Have Anti-Tax Shelter Legislation? 

A Response to Professor Zelenak, 67 TEX. L. REV. 591, 625 (1989); Calvin H. Johnson, What’s a 

Tax Shelter?, 68 TAX NOTES 879, 879-80 (1995); Stanley A. Koppelman, At-Risk and Passive 

Activity Limitations: Can Complexity Be Reduced?, 45 TAX L. REV. 97, 105 (1989); Jerome Kurtz, 

The Interest Deduction Under Our Hybrid Tax System: Muddling Toward Accommodation, 50 TAX 

L. REV. 153 (1995); Cecily W. Rock & Daniel N. Shaviro, Passive Losses and the Improvement of 

Net Income Measurement, 7 VA. TAX REV. 1 (1987). 
70 DEP’T FINANCE CANADA, THE WHITE PAPER – TAX REFORM 1987, at 8 (1987). 
71 See House of Commons Debates, 33-2, vol 1 (23 October 1986) at 642 (Can.) (“We have 

made progress, but in considering the further progress we wish to make, and in light of the recent 

changes in the United States, we decided that a broader approach to tax reform in Canada is 

required.”).  
72 “Tax shelter” was initially defined as “any property of which it is expected, based on 

statements or representations made or proposed to be made in connection with the property, that the 

aggregate of the losses or other amounts, calculated in any of the relevant years . . . will exceed the 

cost of the interest in the property (less prescribed benefits) to the purchaser.” See Canada Revenue 

Agency, Information Circular IC-89-4, “Tax Shelter Reporting” (14 August 2002). In Maege v. The 

Queen, 2006 D.T.C. 3193 and Baxter v. The Queen, 2007 F.C.A. 172, this definition was 

summarized in the equation A > (B – C) where A represents the aggregate of deductions against 

income, B represents the investment or cost, and C represents the prescribed benefits or tax credits 

received. For example, in December 1990, Lazar Jevremovic invested CAD 10,000 in an 

agricultural research company named Botanical Technologies. He then claimed a net business loss 

of CAD 10,000, an investment tax credit of CAD 1,480, and a Quebec tax credit of CAD 3,614. The 

court found that this did indeed meet the mathematical requirement for a tax shelter given that 

10,000 > (10,000 – 5,094). For a more detailed breakdown of Mr. Jevremovic’s case, see Maege v. 

The Queen. Id. Several changes were made to these laws in subsequent years. For example, 

amendments in 1995 and 2003 expanded the scope of these rules to cover additional schemes. See 

Canadian ITA §§ 143.2, 237.1 (of 1995 and 2003, respectively). 



2022] MANDATORY DISCLOSURE RULES 133 
 

 

and distribute its identification number, as assigned by the Canadian Revenue 

Authority (CRA), to all investors in the tax shelter.73 Investors would then include 

this identification number in their own income tax returns. The promoters were 

required to obtain their identification numbers before they began selling or issuing 

the tax shelter scheme. They also needed to provide the CRA with a list of investors 

in their scheme along with their respective contact information, Social Insurance 

Numbers, and the amount paid by each investor.74 Promoters were defined as “any 

person who in the course of a business sells, issues or promotes the sale, issuance 

or acquisition of an interest in a tax shelter or who acts as an agent or advisor in 

respect of such activities.”75 Penalties were imposed on promoters who failed to 

register.76 Investors who participated in a tax shelter scheme without a registration 

number were denied any potential tax benefits of the shelter.77  

Thus, similar to the United States, Canada’s tax shelter registration regime 

targeted the proliferation of individual tax shelters by imposing registration and 

reporting obligations. This narrow scope would ultimately prove inadequate to 

address the growth of corporate tax shelters. Nevertheless, these rules laid the 

groundwork for the expansion of Canada’s reporting regime, discussed in the next 

part. 

 

II. SECOND GENERATION: 2000S AND EARLY 2010S 

 

With the decline of the individual tax shelter industry, the attention of tax 

authorities shifted to countering tax avoidance schemes for corporate taxpayers.78 

While the U.S. and Canadian tax shelter registration rules were too narrow to 

capture these schemes, they did provide a model for a reporting regime that would 

prove useful in addressing other forms of tax avoidance. In the 2000s, the United 

States, followed by several countries including the United Kingdom, South Africa, 

Portugal, Ireland, and Canada, adopted a new type of reporting regime that was 

broad enough to capture the various tax avoidance schemes of corporations, 

individuals, trusts, and other taxpayers.79 While different countries name their 

 
73 See Canadian ITA (of 1988) § 237.1. 
74 See id.  
75 Canada Revenue Agency, supra note 72.  
76 See id.  
77 See Rosemarie Wertschek & James R. Wilson, Shelter from the Storm: The Current State of 

the Tax Shelter Rules in Section 237.1, 56 CAN. TAX J. 285, 287 (2008) 
78 See Elaine Church & Corina Trainer, Reportable Transactions: A Comprehensive Disclosure 

Regime to Combat Tax Shelters, 57 MAJOR TAX PLAN 12-1, at 12-2 to -3 (2005) (“During the late 

1990’s, market activity shifted from individual to corporate tax shelters. Few of these emerging 

corporate transactions appeared to be affected by the regulations that had been developed to address 

the very different issues involved in shelter investments by individuals. Typically, these corporate 

tax shelters were not ‘investment type’ transactions. . . . By 1999, when Treasury launched its study 

of corporate tax shelters, Treasury had become convinced that additional rules were needed.”). See 

also DEP’T TREASURY, THE PROBLEM OF CORPORATE TAX SHELTERS: DISCUSSION, ANALYSIS AND 

LEGISLATIVE PROPOSALS (1999); James S. Eustice, Abusive Corporate Tax Shelters: Old “Brine” 

in New Bottles, 55 TAX L. REV. 135 (2002). 
79 At present, the U.S. and South African regimes are still in place. However, Portugal and 

Ireland have also adopted DAC 6, the United Kingdom has expanded its regime to implement the 

CRS MDRs. Canada is considering expanding its MDRs. See infra Part III. 



134 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

reporting regimes differently, we generally refer to these rules as MDRs.80 

Although modeled similarly, these MDRs differ from their tax shelter 

registration antecedents in that they provide a list of example transactions that are 

required to be reported. These MDRs also list various “hallmarks,” or identifiable 

characteristics associated with tax avoidance schemes. These changes greatly 

widened the scope of reporting requirements, and thereby channeled more 

information to tax authorities. While all of the new MDRs share basic 

characteristics with each other, each regime is adapted to local conditions and 

differs from the others in a number of ways. Each country lists different types of 

transactions that need to be reported. Moreover, different parties are required to 

report in different countries. In the United Kingdom, South Africa, Portugal, and 

Ireland, the promoters of a reportable transaction are required to report, while 

taxpayers need only report when there is no promoter or the promoter fails to 

report.81 In the United States, both the taxpayers and material advisors must 

report.82 In Canada, there are parallel reporting requirements on every beneficiary, 

scheme user, and advisor or promoter entitled to a fee in respect of the transaction.83 

 

A. United States 

 

By the late 1990s, it was estimated that corporate tax shelters had cost the 

U.S. Treasury 10 billion dollars annually and that this figure was “growing 

dramatically.”84 Although Congress, again, sought to tackle the issue by developing 

targeted responses to specific schemes, such an ad hoc approach was ineffective to 

curb corporate tax avoidance.85 It was therefore proposed that a generic approach, 

based on identified characteristics common to many corporate tax avoidance 

practices, was needed.86 

In February 2000, the U.S. Treasury introduced temporary regulations 

imposing a requirement on corporate taxpayers participating in a “reportable 

transaction” to disclose certain specified information in relation to the transaction 

in a disclosure statement to be attached to their tax returns for each taxable year in 

 
80 Action 12, supra note 22, follows a similar approach. Annet Wanyana Oguttu and Ann Kavis-

Kumar also refer to the disclosure rules of the 2000s and early 2010s as MDRs. Notably, these 

authors also consider (as we do) the U.S. and Canadian tax shelter registration rules of the 1980s a 

version of MDRs. See Annet Wanyana Oguttu & Ann Kayis-Kumar, Curtailing Aggressive Tax 

Planning: The Case for Introducing Mandatory Disclosure Rules in Australia (Part 1), 17 

EJOURNAL TAX RES. 83, 85 (2019). 
81 See Finance Act 2004, c. 12, §§ 309-10 (UK), https://www.legislation.gov.uk/ukpga/ 

2004/12/contents [https://perma.cc/8PW9-7BYZ] [hereinafter Finance Act 2004]; Tax 

Administration Act 28 of 2011 [hereinafter TAA] § 34 (S. Afr.); Decreto-Lei n. ̊ 1 29/2008, de 25 

de fevereiro [Decree-Law no. 29/2008], arts. 8, 10, https://dre.pt/dre/detalhe/decreto-lei/29-2008-

247717 [https://perma.cc/K6VP-5TB5] (Port.); Taxes Consolidation Act 1997 (Act No. 39/1997) 

(Ir.), https://www.irishstatutebook.ie/eli/1997/act/39/enacted/en/html [https://perma.cc/QQR9-

RYXL] [hereinafter TCA] § 817E. 
82 See infra note 95 and the accompanying text. 
83 See Canadian ITA § 237.3. 
84 DEP’T TREASURY, supra note 66, at 31. 
85 See id. at 2-6, 11-12, 31, 77-78. 
86 See id. 



2022] MANDATORY DISCLOSURE RULES 135 
 

 

which their income tax liability is affected by the transaction.87 Reportable 

transactions would include transactions identified by the IRS in published guidance 

as tax avoidance transactions, i.e.,.,., listed transactions and transactions exceeding 

certain monetary thresholds which had certain hallmarks commonly associated 

with corporate tax shelters.88 

From August 2000 to October 2002, the temporary rules underwent four 

rounds of revision, during which time the disclosure requirement was extended to 

non-corporate taxpayers including individuals, trusts and partnerships.89 These 

amendments were made because “potentially abusive tax avoidance transactions 

are increasingly being used by high net-worth individuals” and that “both 

corporations and individuals often employ partnerships and trusts to achieve 

unintended tax results.”90 The final regulations were issued in February 2003,91 and 

clarified which transactions are reportable.92 Reportable transactions include those 

offered to a taxpayer by an advisor on a condition of confidentiality, those resulting 

in the taxpayer claiming a loss exceeding specified monetary thresholds, those in 

which the taxpayer can be refunded fees if the intended tax benefits are not 

obtained, and those that are the same as or are substantially similar to transactions 

identified by the IRS in published guidance as being “of interest.”93 

In 2004, the reportable transaction rules were amended once again under 

the American Jobs Creation Act of 2004 (AJCA).94 Notably, this change imposed 

a parallel reporting requirement and list maintenance requirements on material 

advisors of reportable transactions.95 A material advisor is defined as any person 

who provides a tax statement96 with respect to a reportable transaction and receives 

 
87Temp. Treas. Reg. § 1.6011-4T. It is important to mention that the U.S. had first required the 

registration of corporate tax shelters under the Taxpayer Relief Act of 1997. These rules expanded 

those set forth in the Deficit Reduction Act of 1984 and required corporate tax shelter promoters to 

register if their tax shelter was offered under “conditions of confidentiality.” However, this law 

lacked a comprehensive set of listed transactions or hallmarks that the later regime would include. 

See Taxpayer Relief Act of 1997 § 1028, Pub. L. No. 105-34 (1997) (amending I.R.C. § 6111(d)). 
88 See Temp. Treas. Reg. § 1.6011-4T supra note 87. 
89 These revisions took place in August 2000, August 2001, June 2002, and October 2002. See 

65 Fed. Reg. 49909, 66 Fed. Reg. 41133, 67 Fed. Reg. 41324, 67 Fed. Reg. 64799, 67 Fed. Reg. 

64807, for the amendments in Federal Registers. 
90Corporate Tax Shelters: Looking Under the Roof: Hearing Before the S. Comm. on Fin., 117th 

Cong. 90 (Mar. 21, 2002). 
91 See Treas. Reg. §§ 1.6011-4, 20.6011-4, 25.6011-4, 31.6011-4, 53.6011-4, 54.6011-4, 

56.6011-4. The regulations were published in 68 Fed. Reg. 10161.  
92 See Treas. Reg. § 1.6011-4(b) for the definition of “reportable transactions.” The lists of 

current “listed transactions” and “transactions of interest” are available on the IRS website. 

Recognized Abusive and Listed Transactions, IRS, https://www.irs.gov/businesses/ 

corporations/listed-transactions [https://perma.cc/2V38-VLP5] (last visited Mar. 9, 2022); 

Transactions of Interest, IRS, https://www.irs.gov/businesses/corporations/transactions-of-interest 

[https://perma.cc/29TT-MSU6] (last visited Mar. 9, 2022). 
93 Treas. Reg. § 1.6011-4. 
94 See American Jobs Creation Act [hereinafter AJCA] §§ 815-820, Pub. L. No. 108-357 (2004) 

(amending I.R.C. §§ 6111, 6112, 6700, 6662, 6664, 6694, 6707, 6708, 7408). 
95 See AJCA § 815 (codified at I.R.C. §§ 6111, 6112). 
96 In general, a tax statement is “any statement . . ... oral or written, that relates to a tax aspect 

of a transaction that causes the transaction to be a reportable transaction.” IRS, INSTRUCTIONS FOR 

IRS FORM 8918, at 1 (rev. Nov. 2021). 



136 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

income above a certain threshold in respect of that transaction.97 The definition of 

material advisors is substantially broader than the organizer definition under the tax 

shelter registration rules and could include lawyers, brokers, accountants and other 

advisors that were not previously required to register with the IRS under the tax 

shelter registration rules.98 Furthermore, the AJCA repealed the tax shelter 

registration rules, thereby bringing all disclosure obligations under one regime.99 

The AJCA also increased the penalties for failure to comply with the rules.100 

Thus, under the current U.S. reportable transactions regime, all taxpayers 

who have participated in a reportable transaction and all material advisors with 

respect to that transaction must concurrently disclose the transaction on forms 

specified by the IRS for this purpose.101 Parallel reporting requirements were 

intended to ensure that no tax shelter abusers avoided IRS detection.102 Material 

advisors must also prepare and maintain for seven years a client list for every class 

of reportable transactions.103 Material advisors must provide the assigned 

reportable transaction number to the relevant taxpayers so that it can be reported in 

their respective tax returns.104 

The reportable transaction disclosure regime in the United States has been 

credited for playing a critical role in the government’s crackdown on corporate tax 

shelters and various tax avoidance practices.105 This has led one lawyer to exclaim, 

 
97 AJCA § 815 (codified at I.R.C. §§ 6111, 6112). 
98 See Bruce L. Ashton & Robin C. Gilden, New Tax Shelter Rules Under AJCA: Advisors 

Beware, ASPPA ASAP, Nov. 23, 2004, at 1 (“Lawyers and CPAs would almost certainly be material 

advisors, as would brokers and investment advisors.”). See also supra text accompanying note 53. 

The role of tax advisors in tax compliance had been previously studied in Steven Klepper & Daniel 

Nagin, The Role of Tax Preparers in Tax Compliance, 22 POL’Y SCI. 167 (1989). 
99 See U.S. GOV’T ACCOUNTABILITY OFF., GAO-11-493, ABUSIVE TAX AVOIDANCE 

TRANSACTIONS: IRS NEEDS BETTER DATA TO INFORM DECISIONS ABOUT TRANSACTIONS, (2011). 
100 See I.R.C. §§ 301.6707, 301.6707A. 
101 See Treas. Reg. §§ 1.6011-4, 301.6111-3. The relevant forms are Form 8886 for taxpayers, 

and Form 8918 for material advisors. For taxpayers, the disclosure must be made by attaching Form 

8886 to the tax returns, for each taxable year for which the taxpayer participates in the reportable 

transaction, whilst for material advisors, the disclosure must be made by filing Form 8918 by the 

“last day of the month that follows the end of the calendar quarter in which the advisor became a 

material advisor with respect to the transaction.” See Treas. Reg. §§ 1.6011-4(e), 301.6111-3(e). For 

the disclosure to be considered complete, the information provided on the form must: (i) identify 

and describe the transaction in sufficient detail for the IRS to be able to understand the tax structure 

of the transaction; (ii) identify all parties involved in the transaction (for taxpayers) or any material 

advisor(s) whom the material advisor knows or has reason to know acted as a material advisor with 

respect to the transaction (for material advisors); (iii) describe the expected tax treatment and all 

potential tax benefits expected to result from the transaction; and (iv) describe any tax result 

protection with respect to the transaction. 
102 See U.S. DEP’T TREASURY, THE TREASURY DEPARTMENT’S ENFORCEMENT PROPOSALS FOR 

ABUSIVE TAX AVOIDANCE TRANSACTIONS 2 (2002). 
103 See Treas. Reg. § 301.6112-1. In this list, the following details for each client must be 

retained: (i) the date the reportable transaction was entered into; (ii) the amount invested; (iii) the 

tax treatment intended or expected to be derived from participation in the transaction; and (iv) the 

identity of other material advisors to the transaction. Copies of any tax analyses or opinions provided 

to one or more clients or prospective clients must also be attached to the client list. 
104 See Treas. Reg. § 301.6111-3(d). 
105 See Joshua D. Blank, United States National Report on Mandatory Disclosure Rules, 

 



2022] MANDATORY DISCLOSURE RULES 137 
 

 

“the tax shelter war is over. The government won.”106 In particular, after the 

introduction of these rules, the United States saw fewer marketed tax products while 

companies dedicated measurably more time to tax reporting instead of tax 

planning.107 The government was also able to reclaim some lost revenue.108 

However, while the reportable transaction disclosure regime has helped the IRS to 

detect and deter various tax avoidance practices, it has not fully eliminated 

corporate tax avoidance and aggressive tax planning, especially by multinational 

enterprises (MNEs) engaged in cross-border transactions, as further discussed in 

the next part.109 

 

B. United Kingdom 

 

In 2004, the United Kingdom adopted reporting requirements similar to the 

U.S. reportable transactions regime. The Disclosure of Tax Avoidance Schemes 

(DOTAS) regime110 was adopted to “introduce transparency in relation to the 

 
MANDATORY DISCLOSURE RULES (forthcoming 2022), https://papers.ssrn.com/sol3/papers. 

cfm?abstract_id=3890935 [https://perma.cc/TQ8F-99RF] (“Government officials and academics in 

the US have widely praised the reportable transaction disclosure regime as an effective response to 

the tax shelter problem.”). 
106Pamela F. Olson, Now That You've Caught the Bus, What Are You Going to Do with It - 

Observations from the Frontlines, the Sidelines, and between the Lines, So to Speak, 60 TAX LAW. 

567, 567-81 (2007). 
107 See id. at 567-68 (“[T]ax departments were spending 23% of their time on tax financial 

reporting requirements in 2006, compared to 9% in 2004. During the same period, the time spent on 

tax planning decreased from 28% to 20%.”). 
108 For example, in 2004 the IRS allowed taxpayers who had participated in so-called “Son of 

Boss” tax shelters, one of the listed transactions, to voluntarily come forward and close out their tax 

disputes by paying the owed tax and certain penalties. Over one-thousand taxpayers responded and 

the IRS was able to obtain over $3.2 billion in unpaid taxes and penalties. For more, see id. at 569; 

I.R.S. Notice 2000-44, 2000-2 C.B. 255; I.R.S. Announcement 2004-46, I.R.B. 2004-21. 
109 There were some indications that schemes moved overseas in order to avoid U.S. reporting. 

See U.S. GOV’T ACCOUNTABILITY OFF., supra note 99 (“One theme that emerged from GAO’s 

discussions with these experts is that [abusive tax avoidance transactions] marketed by promoters 

to corporations and wealthy individuals have declined in recent years, although the experts had 

different views on the extent of the decline. They also said that [abusive tax avoidance transactions] 

have become more international in nature.”). See also infra Part III. For further discussion on the 

current state of the U.S. reportable transactions regime and some proposals for reform, see Joshua 

D. Blank & Ari Glogower, The Trouble with Targeting Tax Shelters, 74 ADMIN. L. REV. 

(forthcoming 2022). 
110 As contained in Part 7 of the Finance Act 2004, and its implementing regulations: (i) The 

Tax Avoidance Schemes (Prescribed Descriptions of Arrangements) Regulations 2006, SI 

2006/1543 (as amended by SI 2009/2033, SI 2010/2834, SI 2013/2595, SI 2016/99, and SI 

2017/1171) [hereinafter Arrangement Regulations]; (ii) The Tax Avoidance Schemes (Promoters 

and Prescribed Circumstances) Regulations 2004, SI 2004/1865 (as amended by SI 2004/2613 and 

SI 2015/945) [hereinafter Promoter Regulations]; (iii) The Tax Avoidance Schemes (Information) 

Regulations 2012, SI 2012/1836 (as amended by SI 2013/2592, SI 2015/948, and SI 2017/1171) 

[hereinafter Information Regulations]; and (iv) The Finance Act 2014 (High-Risk Promoters 

Prescribed Information) Regulations 2015, SI 2015/549. Also compare Taxes Management Act 

1970, c. 9 § 98C (UK), which sets out the penalties for persons who fail to provide the information 

required by Part 7, with the level of penalties set out in The Tax Avoidance Schemes (Penalty) 

 



138 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

marketing and use of tax avoidance schemes” and close down such schemes more 

quickly.111 The DOTAS regime was preferred over other means of obtaining 

enhanced information, such as establishing a pre-transaction ruling mechanism or 

increasing the disclosure requirements in tax returns because it would provide real-

time information and easier identification of the schemes by the tax authority.112 

Under the DOTAS regime, promoters113 of “notifiable arrangements or 

proposals” must disclose specified details of the schemes to HMRC within the 

stated time period, with taxpayers only residually subject to the disclosure 

obligation where there is no promoter in respect of the arrangement, where the 

promoter is resident outside of the United Kingdom and does not make a disclosure, 

or where the promoter is prevented by legal professional privilege (LPP) from 

making a disclosure.114  

An arrangement or proposal is notifiable if three conditions are met. The 

first condition is that the arrangement will or might be expected to enable a person 

to obtain a UK tax advantage.115 The second condition is that obtaining that 

advantage is or might be expected to be one of the main benefits of the 

arrangement.116 The third condition is that the arrangement bears one or more of 

the hallmarks applicable to the type of scheme in question.117 Similar to the U.S. 

rules, the DOTAS regime contains confidentiality118 and loss-scheme hallmarks.119 

However, the hallmarks in the U.S. and UK regimes are not identical. For example, 

in the UK these hallmarks employ an “informed observer test” under which a 

hypothetical informed observer must determine whether a scheme is primarily 

designed to procure tax advantages through losses.120 In addition to the 

confidentiality and loss-scheme hallmarks, the DOTAS regime also contains 

 
Regulations 2007, SI 2007/3104 (as amended by SI 2010/2743), and HM REVENUE & CUSTOMS, 

Disclosure of Tax Avoidance Schemes: Guidance, GOV.UK, 

https://www.gov.uk/government/publications/disclosure-of-tax-avoidance-schemes-

guidance/disclosure-of-tax-avoidance-schemes [https://perma.cc/ 2WND-A4D2] (Feb. 1, 2022). 
111 See DEPARTMENT OF INLAND REVENUE, REGULATORY IMPACT ASSESSMENT: TACKLING 

TAX AVOIDANCE – DISCLOSURE REQUIREMENTS, 2004, at 1-2 (UK). 
112 See id. 
113 A “promoter” is defined as any person, who, in the course of a business involving the 

provision of services relating to tax or a business carried on by a bank or securities house, (a) is to 

any extent responsible for the design of a scheme (unless he/she passes one of the “benign,” “non-

advisor” or “ignorance” tests set out in Reg. 4 of the Promoter Regulations); (b) organizes or 

manages the implementation of a scheme; (c) makes a firm approach to another person with a view 

to making a scheme available for implementation by that person or others; or (d) makes a scheme 

available for implementation by others. HM REVENUE & CUSTOMS, supra note 110. See also 

Finance Act of 2004 § 307. 
114 Finance Act of 2004 §§ 309-10. There are also special rules when there is more than one 

promoter. See HM REVENUE & CUSTOMS, supra note 110; Finance Act of 2004 § 308. 
115 See Finance Act of 2004 § 306. 
116 See id. 
117 See id. 
118 See HM REVENUE & CUSTOMS, supra note 110. See also SI 2006/1543, Reg. 6 (as amended 

by SI 2013/2595). 
119 See HM REVENUE & CUSTOMS, supra note 110, § 7.7; SI 2006/1543, Reg. 12. The hallmark 

was later amended by SI 2016/99. 
120 SI 2006/1543, Reg. 12, supra note 110. The informed observer test is also applied to the 

standardized tax products hallmark. SI 2006/1543, Reg. 10 (as amended by SI 2016/99). 



2022] MANDATORY DISCLOSURE RULES 139 
 

 

several other hallmarks including those relating to the payment of a premium fee to 

a promoter,121 the sale of a standardized tax product,122 leasing arrangements,123 

employment income,124 and when a tax advantage is from the inclusion of a 

financial product in an arrangement.125 

A reportable arrangement must be reported by the promoter within five 

business days beginning with the day after the promoter makes the scheme 

available for implementation or becomes aware of a transaction forming part of the 

scheme, whichever is earlier.126 Where the disclosure obligation falls upon the 

taxpayer, disclosure must be made within 30 days of the taxpayer entering into the 

first transaction that is part of the reportable scheme.127 The DOTAS regime also 

imposes similar client list and scheme reference number (SRN) requirements found 

in the U.S. rules, but with additional obligations on promoters to provide the lists 

to HMRC on a quarterly basis, and on clients to pass on the SRN to any other person 

who may reasonably be expected to benefit from the scheme.128 

In addition to the differences already mentioned, the UK regime differs 

from the U.S. regime in that it takes a promoter-based approach while the U.S. 

regime takes a transaction-based approach.129 In a promoter-based approach, the 

language of the law focuses more on the role played by the promoter in the 

transaction.130 In contrast, a transaction-based approach focuses more closely on 

identifying problematic transactions than problematic promoters.131 These 

differences manifest themselves in who has an obligation to report and what types 

of hallmarks are relied upon in the law.132 In a transaction-based approach, 

reporting obligations may fall on both promoters and taxpayers, whereas in a 

promoter-based approach the obligation mainly falls on the promoter.133 Moreover, 

 
121 See HM REVENUE & CUSTOMS, supra note 110, § 7.5; SI 2006/1543. 
122 See HM REVENUE & CUSTOMS, supra note 110, § 7.6; SI 2006/1543, Reg. 10 (as amended 

by SI 20162016/99). 
123 See HM REVENUE & CUSTOMS, supra note 110, § 7.8; SI 2006/1543, Reg. 13-17. 
124 See HM REVENUE & CUSTOMS, supra note 110, § 7.9; SI 2006/1543, Reg. 18. 
125 See HM REVENUE & CUSTOMS, supra note 110, § 7.10; SI 2006/1543, Reg. 19 (as amended 

by SI 2016/99). See also Arrangement Regulations (more details on all of the UK hallmarks). 
126 See Information Regulations; HM REVENUE & CUSTOMS, supra note 110. 
127 See Finance Act of 2004 §§ 308, 310; Information Regulations, Reg. 5. Similar to the U.S. 

rules, under the DOTAS regime, the disclosure must include “sufficient information as might 

reasonably be expected to enable an officer of the HMRC to comprehend the manner in which the 

proposal or arrangement is intended to operate,” including (i) the promoter’s and co-promoters’ (for 

notification by promoter), or the scheme user’s and the promoter’s (for notification by scheme user) 

name and address; (ii) details of the provision by virtue of which the arrangements are notifiable; 

(iii) a summary of the arrangements and the name (if any) by which they are known; (iv) information 

explaining each element of the arrangements (including the way in which they are structured) from 

which the tax advantage expected to be obtained under the arrangements arises; and (v) the statutory 

provisions, relating to any of the prescribed taxes, on which the tax advantage is based. See 

Information Regulations, Reg. 4. 
128 See Finance Act of 2004 §§ 312, 313, 316; Information Regulations, Reg. 6, 8B. 
129 See Action 12, supra note 22, at 32. 
130 See id. 
131 See id. 
132 See id. 
133 This is reflected in the differences between the U.S. and UK regimes. See supra notes 95, 

113 and the accompanying text.  



140 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

a promoter-based regime uses generic hallmarks that focus on whether there is an 

intended tax benefit.134 A transaction-based approach, on the other hand, would 

instead rely more on specific hallmarks.135 Thus, the UK regime, following a 

promoter-based approach, lists generic hallmarks which indicate reportability by 

the promoter only if the main outcome of the arrangements is a tax benefit. Despite 

these differences, there does not appear to be a significant difference in the efficacy 

of each approach.136 

 

C. Other Countries 

 

Similar reporting regimes were adopted in other countries, including South 

Africa in 2005, Portugal in 2008, Ireland in 2011, and Canada in 2013.137 These 

countries adopted reporting regimes to better detect and address tax avoidance 

practices.138 Various sources indicate that earlier regimes influenced the adoption 

of these new regimes.139 Additionally, during this period, several other countries 

 
134 See Action 12, supra note 22, at 32. 
135 See id. It should be noted that the United States, despite employing a transaction-based 

approach, does use generic hallmarks. Thus, the differences between a transaction-based approach 

and a promoter-based approach exist on a spectrum. 
136 The OECD has noted that both promoter-based approaches and transaction-based 

approaches are generally equally effective. See Action 12, supra note 22, at 32. See also ANTONY 

SEELY, HOUSE OF COMMONS, TAX AVOIDANCE: A GENERAL ANTI-AVOIDANCE RULE – 

BACKGROUND HISTORY (1997-2010), Briefing Paper No. 2956 (2020).  
137 See the Revenue Laws Amendment Act 45 of 2003, which introduced MDRs in a new § 76A 

of the Income Tax Act 58 of 1962 (South African ITA) that came into effect in 2005 (the MDRs 

were subsequently transferred to §§ 80M-80T of the South African ITA in 2008, and to §§ 34 to 39 

of the TAA in 2012) (for South Africa); the Decreto-Lei n.º 29/2008 de 25 de Fevereiro [Decree-

Law no. 29/2008], https://dre.pt/dre/detalhe/decreto-lei/29-2008-247717, which came into effect in 

May 2008 (for Portugal); Chapter 3 of Part 33 of the Taxes Consolidation Act 1997 (Act No. 

39/1997), https://www.irishstatutebook.ie/eli/1997/act/39/enacted/en/html (comprising §§ 817D-

817O), which came into effect in January 2011 (for Ireland); Income Tax Act, R.S.C. 1985, c C-1 § 

237.3, which came into effect in June 2013 (for Canada). 
138 For South Africa, see National Treasury, Explanatory Memorandum on the Revenue Laws 

Amendment Bill, at 75 (2003) (“It is proposed that special reporting rules for transactions that 

contain indicators of potential tax avoidance be introduced. The purpose of this reporting system is 

to uncover ‘innovative’ corporate tax products that effectively cost the tax system hundreds of 

millions (and perhaps even billions) of Rand annually.”). For Ireland, see Committee Stage Debates 

on the Finance Bill in the Houses of the Oireachtas § 141 (Feb. 24, 2010) (“The primary purpose of 

the new disclosure regime is to constitute what can be regarded as an effective early warning system 

by obtaining information on aggressive tax avoidance schemes at an early stage before a loss of 

taxation becomes apparent. The Government can decide, if appropriate, to close such schemes down 

before they can do significant damage to tax revenues. Mandatory disclosure will provide the 

Revenue Commissioners with an important instrument to tackle tax avoidance schemes that are 

leading to a significant loss of taxation revenue”). For Portugal, see the introduction to Decree-Law 

29/2008. For Canada, see Dep’t of Finance Canada, Background and Description of the Proposals 

(May 7, 2010); Dep’t of Finance Canada, Explanatory Notes in Respect of Legislative Proposals 

Relating to the Income Tax Act and Related Acts and Regulations, at 208 (Sept. 2010); Dep’t of 

Finance Canada, Explanatory Notes Relating to the Income Tax Act, the Excise Tax Act and Related 

Legislation, at 446 (Oct. 2012). 
139 In South Africa, the guidance issued by the government in 2005 describes at the beginning 

 



2022] MANDATORY DISCLOSURE RULES 141 
 

 

adopted reportable transaction disclosure regimes that apply solely to the taxpayers 

and not to promoters or other intermediaries.140  

Despite the common origins and aims of the reporting regimes adopted 

between 2005 and 2013 in South Africa, Portugal, Ireland, and Canada, the 

substance of the rules differs, primarily on three fronts: the persons subject to the 

disclosure obligations, the transactions required to be disclosed, and the time when 

disclosure must be made. Below we outline the key features of the MDRs in each 

of these countries. 

South Africa adopted its “reportable arrangements” regime in 2005.141 

Under this regime, the primary disclosure obligation is on the promoter of the 

arrangement.142 If there is no resident promoter, then other “participants” of the 

arrangement are subject to the disclosure obligations.143 Transactions that are 

regarded as reportable include listed arrangements and arrangements expected to 

 
of the guide the disclosure requirements in the United Kingdom, the United States, and Canada. See 

South African Revenue Service, Reportable Arrangement Guide 2 (Mar. 1, 2005). For Ireland, see 

Committee Stage Debates on the Finance Bill in the Houses of the Oireachtas § 141 (Feb. 24, 2010) 

(“Other jurisdictions such as the United Kingdom, South Africa, New Zealand, Australia, and the 

United States all have running through their legislation a common purpose, namely, the need to 

know as early as possible the details of schemes they may not consider acceptable. Timely 

information is crucial to combating tax avoidance. It is only where schemes are known that they can 

be challenged and, where appropriate, existing legislation amended or new legislation introduced to 

deal with them. The earlier in the life cycle of a scheme that the tax authorities learn about it, the 

more effectively it can be closed down before it inflicts significant fiscal damage.”). In Portugal, the 

introduction to Decree-Law 29/2008 cites the disclosure regimes of the United States, Canada, and 

United Kingdom as influences. In Canada, several publications mentioned the U.S. and UK regimes 

as a model for Canada’s regime. See Gilles N. Larin & Robert Duong, Effective Responses to 

Aggressive Tax Planning What Canada Can Learn from Other Jurisdictions Instalment 4: United 

Kingdom - Disclosure Rules, RSCH. CHAIR TAX’N & PUB. FIN. (July 2009); Gilles Larin, Some 

Thoughts on Disclosure Rules in Canada: A Peek into the Future, 61 CAN. TAX J. 209 (2013). 
140 For example, Israel adopted in 2007 a reporting requirement for taxpayers participating in 

certain reportable transactions. See Income Tax Regulations (Reportable Tax Planning) 5767-2006; 

VAT Regulations (Reportable Tax Planning) 5767-2006. Australia introduced in 2011 a Reportable 

Tax Position regime which requires corporate taxpayers to report certain tax position. See Michael 

Walpole & David Salter, Regulation of Tax Agents in Australia, 12 eJTR 335, 355-56 (2014). As 

these regimes do not impose reporting obligations on intermediaries, they are outside the scope of 

this Article. 
141 South Africa initially imposed the disclosure obligation on corporate and trust taxpayers 

only, and only in respect of listed transactions (essentially, those involving hybrid instruments), and 

transactions that provide for a variation of interest, fees, etc. if the actual tax benefits differed from 

the anticipated tax benefits. However, the number of disclosures proved disappointing. It was noted 

that taxpayers “raised technical points to avoid reporting or restructured their transactions to avoid 

the triggers for reporting.” The MDRs were therefore substantially amended, to impose the primary 

disclosure obligation on promoters, and to widen the scope of the arrangements subject to the 

reporting requirement, with a catch-all “hallmark” linked to the GAAR. See SARS, Explanatory 

Memorandum on the Revenue Laws Amendment Bill 2006, at 61-66 (2006). See also SARS, Media 

Release – New Reportable Arrangements Legislation Takes Effect (Apr. 9, 2008).  
142 “Promoter” is defined under TAA § 34 as “[the person] principally responsible for 

organising, designing, selling, financing or managing the… arrangement.” 
143 TAA § 37. See TAA § 34 which states that a “‘participant’, in relation to an ‘arrangement’, 

means— (a) a ‘promoter’; or (b) a company or trust which directly or indirectly derives or assumes 

that it derives a ‘tax benefit’ or ‘financial benefit’ by virtue of an ‘arrangement.’” 



142 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

give rise to a tax benefit if they have certain hallmarks.144 A reportable transaction 

must be disclosed within 45 business days after an amount is first received, paid or 

incurred by a participant.145  

 Portugal adopted its reporting regime for abusive tax planning arrangements 

in 2008. Under this regime, the primary disclosure requirement is on promoters of 

the scheme, and scheme users are only subject to the disclosure obligation if there 

is no resident promoter.146 Transactions that must be reported include those aimed 

at obtaining, solely or as its main purpose, a tax advantage147 by a taxable person 

and that have certain hallmarks.148 These schemes must be disclosed within 20 days 

following the end of the month in which the scheme was made available to clients 

or in which the scheme was implemented.149 

Ireland adopted its mandatory disclosure regime in 2011.150 Under this 

regime, the primary disclosure obligation is on the promoters of the transaction.151 

Transactions that must be reported include those which fall within a set of specified 

categories, those that are expected to enable a tax advantage, and those for which 

one of the main benefits is expected to be a tax advantage.152 The disclosure must 

be made within five business days.153 

 Canada adopted its reportable transaction disclosure regime in 2013.154 

Under this regime, there are parallel disclosure obligations on every beneficiary, 

scheme user, and advisor or promoter entitled to a fee in respect of the 

transaction.155 Transactions that must be disclosed include those that are undertaken 

to obtain a tax benefit156 and bear at least two of three hallmarks.157 Disclosures 

must be made “on or before June 30 of the calendar year following the calendar 

year in which the transaction first became a reportable transaction in respect of the 

person.”158 

 

 
144 See TAA § 35 for the specified hallmarks. 
145 See TAA § 37(4). 
146 See Decreto-Lei n.º 29/2008 de 25 de Fevereiro [Decree-Law no. 29/2008 of 25 February], 

arts. 8-10, https://dre.pt/dre/detalhe/decreto-lei/29-2008-247717. 
147 See id. art. 3. 
148 See id. art. 4 for the specified hallmarks. 
149 See id. art. 7. 
150 See Chapter 3 of Part 33 of the Taxes Consolidation Act 1997 (TCA) (comprising §§ 817D 

to 817O), which came into effect in January 2011. Ireland’s MDRs were modeled on, and are thus 

substantially similar to the UK DOTAS regime, although additional triggers for reporting can be 

found in the Irish MDRs. 
151 Scheme users are subject to the disclosure obligation if there is no resident promoter, the 

promoter is outside of the state or the promoter asserts that LPP prevents the disclosure from being 

made. See TCA §§ 817E-817H. 
152 See TCA § 817D. See also Mandatory Disclosure of Certain Transactions Regulations 2011, 

SI No. 7 (2011), as amended by The Mandatory Disclosure of Certain Transactions (Amendment) 

Regulations 2015, SI No. 28 (2015). 
153 See TCA §§ 817E. 
154 See Income Tax Act, R.S.C. 1985, c C-1 § 237.3, which came into effect in June 2013. 
155 See id. § 237.3(2). 
156 See id. § 237.3. 
157 See id. § 237.3(1) for the hallmarks. 
158 Id. § 237.3(5). 



2022] MANDATORY DISCLOSURE RULES 143 
 

 

III. THIRD GENERATION: 2015-PRESENT 

 

Following their demonstrated success across multiple jurisdictions in the 

2000s and early 2010s, MDRs have begun proliferating globally at a much-

accelerated pace since 2015. This is primarily due to the work of the OECD and the 

EU. While their diffusion had once proceeded gradually on a country-by-country 

basis, MDRs are now being adopted simultaneously across different jurisdictions. 

The new MDRs, and in particular DAC 6 and CRS MDRs, are substantially 

different from their predecessors. For example, DAC 6 adopts much broader 

reporting requirements, expands the reportability of cross-border hallmarks, and 

imposes significant reporting obligations on a wide set of intermediaries. 

 

A. DAC 6 

 

No jurisdiction has adopted MDRs as expansively as the EU Member 

States. In 2018, the EU adopted Council Directive 2018/822 (DAC 6).159 DAC 6 

requires all EU Member States to implement domestic MDRs for cross-border 

transactions based on certain mandatory provisions adopted by the EU.160 At 

present, all 27 Member States have transposed DAC 6 into their national laws.161 

 
159 See Council Directive (EU) 2018/822 amending Directive 2011/16/EU as regards mandatory 

automatic exchange of information in the field of taxation in relation to reportable cross-border 

arrangements 2018 O.J. (L 139). See also European Commission, Questions and Answers on new 

tax transparency rules for intermediaries (June 21, 2017); European Commission, Directorate 

General for Taxation and Customs Union, Summary Report Responses received on disincentives for 

advisors and intermediaries for potentially aggressive tax planning schemes (June 2017), which 

provides important information on pre-DAC 6 perspectives on MDRs from various stakeholders in 

the EU including trade/business associations, national/regional parliaments, law firms, tax 

consultancies, financial institutions, academic institutions, private citizens, NGOs, and others. 

Among those surveyed 69% believed that MDRs for intermediaries would change aggressive tax 

planning schemes and 44% believed that there was a need for MDRs compared to 23% who believed 

there was no need. Among the NGOs surveyed 93% believed there was a need for MDRs while only 

17% of tax consultancies and advisors shared that opinion. 
160 See DAC 6, supra note 9, art. 2. As a Directive, DAC 6 requires Member States to take 

necessary measures to implement its mandatory provisions by Dec. 31, 2019, and to apply their 

implementing provisions starting July 1, 2020. 
161 For detailed information on the status of each Member State’s individual DAC 6 regime, see 

Mandatory Disclosure Requirements – Updates, KPMG (June 4, 2021). See also Anna Vilke & 

Gunta Linde, Latvia – DAC 6 Domestic Implementation, BAKER TILLY, 

https://www.bakertilly.global/media/7978/latvia.pdf [https://perma.cc/ 64QE-CC92] (for Latvia); 

Lithuania Publishes Law to Implement EU Directive on Reportable Cross-Border Arrangements, 

Orbitax (Aug. 27, 2019), https://www.orbitax.com/news/archive.php/ Lithuania-Publishes-Law-to-

Imp-3950027 [https://perma.cc/7LCG-GZV7] (for Lithuania); Spain: Transposition of EU directive 

(DAC 6) completed, KPMG (May 5, 2021), https://home.kpmg/us/en/home/insights/2021/05/tnf-

spain-transposition-eu-directive-dac6-completed.html [https://perma.cc/N6LV-FEYN] (for Spain); 

Andra Casu & Alexandra Ovedenie, Mandatory Disclosure Regime - MDR, 2019 TAX MAG. 190 

(2019) (for Romania); Baker McKenzie Luxembourg, Diego Duarte de Oliveira & Olivier dal Farra, 

Mandatory disclosure rules (DAC6): A look at private equity investment in Luxembourg, INT’L TAX 

REV. (2020) (for Luxembourg); Flavia Vespasiani & Bognandi Stefano, DAC 6 and Hallmarks 

Addressing TP in Italy, INT’L TAX REV. (, 2021) (for Italy). Most Member States have closely 

aligned their tax policy to DAC 6 (i.e., cross-border arrangement reporting and obligatory 

 



144 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

DAC 6 is significant since it not only adopts the best practices recommended by 

the OECD but goes further.162 Given that the EU often sets an example for other 

countries to follow and that its rules apply to 27 countries, DAC 6’s impact could 

be far-reaching. 

DAC 6 builds upon BEPS Action 12.163 The OECD’s BEPS project aimed 

to address weaknesses in the international tax system.164 Of the 15 action reports, 

published in October 2015, Action 12 called on countries to adopt and implement 

MDRs.165 Action 12 includes a comprehensive set of recommendations for the 

design and implementation of MDRs.166 While most MDRs at the time were 

 
intermediary reporting). However, Poland has extended its regime to cover domestic arrangements 

in addition to cross-border arrangements. This is also true in Portugal and Ireland where the new 

DAC 6 rules have built upon existing MDRs. 
162 For a discussion of the components of DAC 6 while it was still in development, see Franklin 

Cachia, Tax Transparency for Intermediaries: The Mandatory Disclosure Rules and Its EU Impact, 

27 EC TAX REV. 206 (2018). See also Dimitar Hristov & Anna Zeitlinger, The Impact of the 

Proposed EU Directive on Tax Intermediaries on the Austrian Foundation as Tax Planning Tool, 

24 TRUSTS & TRUSTEES 526 (2018) for a discussion on the projected impact of DAC 6 on Austrian 

intermediaries. 
163 See Carole Hein, Eric Centi & Julien Lamotte, DAC 6: One Directive, Several Applications, 

INT’L TAX REV. (2020) (“The European Union (EU) Directive on the mandatory automatic exchange 

of information in the field of taxation in relation to reportable cross-border arrangements (commonly 

known as DAC6) comes from the BEPS initiative, notably from the BEPS Action 12 report on the 

mandatory disclosure rules (MDR).”). 
164 For further background about the BEPS project, see OECD, OECD/G20 BASE EROSION AND 

PROFIT SHIFTING PROJECT, EXPLANATORY STATEMENT: 2015 FINAL REPORTS, at 4 (2015), 

https://www.oecd.org/ctp/beps-explanatory-statement-2015.pdf [https://perma. cc/X5T7-5TDS]. 

For extensive literature on the BEPS project, see, e.g., Reuven S. Avi-Yonah & Haiyan Xu, 

Evaluating BEPS: A Reconsideration of the Benefits Principle and Proposal for UN Oversight, 6 

HARV. BUS. L. REV. 185 (2016); Rifat Azam, Ruling the World: Generating International Tax 

Norms in the Era of Globalization and BEPS, 50 SUFFOLK U. L. REV. 517 (2017); Yariv Brauner, 

Treaties in the Aftermath of BEPS, 41 BROOK. J. INT’L L. 973 (2016); Irene Burgers & Irma 

Mosquera, Corporate Taxation and BEPS: A Fair Slice for Developing Countries?, 10 ERASMUS L. 

REV. 29 (2017); Allison Christians, BEPS and the New International Tax Order, 2016 BYU L. REV. 

1603 (2016); Arthur J. Cockfield, Shaping International Tax Law and Policy in Challenging Times, 

54 STAN. J. INT’L L. 223 (2018); Mindy Herzfeld, The Case Against BEPS: Lessons for Tax 

Coordination, 21 FLA. TAX REV. 1 (2017); WU INST. FOR AUSTRIAN & INT’L TAX L., 

IMPLEMENTING KEY BEPS ACTIONS: WHERE DO WE STAND? (Michael Lang et al. eds., 2019).  
165 Note that prior to the BEPS project in 2013-2015, the OECD had already noted the 

importance of timely, targeted, and comprehensive information to counter aggressive tax planning 

and the existence of MDRs in certain OECD countries in its report, TACKLING AGGRESSIVE TAX 

PLANNING THROUGH IMPROVED TRANSPARENCY AND DISCLOSURE – REPORT ON DISCLOSURE 

INITIATIVES (Feb. 2011). However, it was not until the BEPS initiative that the OECD proposed a 

set of comprehensive measures to tackle these issues. For further discussion on aggressive tax 

planning and harmful tax competition in the context of BEPS and various actions taken by the 

European Union, see Ana Paula Dourado, Aggressive Tax Planning and Harmful Tax Competition, 

in RESEARCH HANDBOOK ON EUROPEAN UNION TAXATION LAW 390 (Christiana HJI Panayi, 

Werner Haslehner & Edoardo Traversa eds., 2020). See also Tatjana Svažič, Anti-BEPS Measures 

and Their Impact on Business Performance of Multinational Enterprises, 65 NAŠE GOSPODARSTVO/ 

OUR ECON. 99 (2019) for an explanation and prediction of the consequences of BEPS (including 

Action 12) on the tax and profits of MNEs. 
166 See Action 12, supra note 22. The recommendations are largely uncontroversial: imposing 

a parallel or primary disclosure obligation on promoters and taxpayers; establishing a mechanism to 

 



2022] MANDATORY DISCLOSURE RULES 145 
 

 

focused on domestic transactions, the Action 12 recommendations specifically 

called for a comprehensive set of cross-border hallmarks and a system for the 

exchange of information.167 At first, Action 12 had little impact on the global tax 

environment because it was not included in the BEPS project’s minimum standards; 

it is considered as non-binding “soft law.”168 This changed in 2018 when the EU 

adopted DAC 6. Though DAC 6 incorporates many of the Action 12 

recommendations and adopts the same basic structure as other MDRs, it is more 

extensive in scope in three significant respects: the persons subject to the reporting 

obligations, the transactions subject to reporting, and the information exchange 

requirements. 

First, regarding who needs to report, the primary disclosure obligation under 

DAC 6 rests not only on promoters but also on all intermediaries of the 

arrangement. Intermediaries under DAC 6 means both promoters and “any person 

that . . . knows or could be reasonably expected to know that they have undertaken 

to provide, directly or by means of other persons, aid, assistance or advice with 

respect to designing, marketing, organizing, making available for implementation 

or managing the implementation of a reportable cross-border arrangement.”169 Save 

for a nexus requirement, the definition is not subject to any qualification, such as a 

materiality threshold.170 Any service providers, including lawyers and accountants, 

who provide any “aid, assistance or advice” on the design, marketing or 

 
track disclosures and to link disclosures to scheme users; linking the timing of disclosure to when 

the scheme is first made available for implementation or when the scheme is first implemented; 

introducing penalties to ensure compliance; and having a mix of generic and specific hallmarks to 

target both known schemes and general areas of concern. Recommended generic hallmarks include 

the following: confidentiality, premium fee, contractual protection, and standardized tax product 

hallmarks. While Action 12 recognizes that different combinations of hallmarks may be suitable for 

different countries, it does provide a list of specific hallmarks including those for loss schemes 

(inspired by the MDRs in the United States, the United Kingdom, Canada, Ireland, and Portugal), 

leasing arrangements (inspired by the United Kingdom), employment schemes (inspired by Ireland), 

converting income schemes (inspired by Ireland and Portugal), schemes with entities in low tax 

jurisdictions (inspired by Portugal), arrangements involving hybrid instruments (inspired by South 

Africa), transactions with significant book-tax differences (inspired by the United States), listed 

transactions (inspired by the United States), and transactions of interest (inspired by the United 

States). 
167 Some of the recommended cross-border hallmarks include the following: multiple claims of 

deductions for depreciation or amortization in respect of the same asset; multiple claims of relief 

from double taxation in respect of the same item of income; the making of deductible cross-border 

payments to associated enterprises that are not resident for tax purposes in any jurisdiction or that 

are resident in a jurisdiction that does not impose income tax; transfers of assets where there is a 

material difference in the amount being treated as payable, in consideration for the assets involved. 

See Action 12, supra note 22, at 68-69.  
168 OECD, OECD/G20 BASE EROSION AND PROFIT SHIFTING PROJECT: 2015 FINAL REPORTS: 

FREQUENTLY ASKED QUESTIONS, at 5 (2015).  
169 DAC 6, supra note 9, art. 1(1). The focus of Action 12 is on promoters and taxpayers, not 

other intermediaries and especially not those without any material connection to the tax aspects of 

the transaction. See Action 12, supra note 22, at 33-36, 74. 
170 For intermediaries to be subject to the reporting obligation, they must either be tax-resident, 

incorporated or registered with a professional association related to legal, tax or consultation 

services, or have a permanent establishment (PE), in a Member State. See DAC 6, supra note 9, art. 

1(1). 



146 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

implementation of a reportable scheme would therefore be subject to the primary 

reporting obligations.171 This is substantially different than the U.S. regime which 

only applies to material advisors who give tax statements to their clients.172 Under 

DAC 6 there is no such requirement for the intermediary to give any tax-related 

statements or services. Thus, DAC 6 applies to a much larger set of intermediaries 

than the U.S. regime.  

Some have asserted that this broad definition might jeopardize the 

functioning of the overall tax system, promote harmful over-disclosure, and 

possibly infringe on the rights of taxpayers.173 Others have worried about the effects 

of DAC 6 on legal professional privilege.174 Given these concerns, the 

constitutional courts of several EU Member States are currently evaluating the 

consistency of DAC 6 with both EU law and the laws of Member States.175 Such 

resistance is unsurprising given that DAC 6, in some sense, represents a reinvention 

of how tax administrations, taxpayers and intermediaries approach tax policy and 

transparency in the EU.176 

 
171 DAC 6, supra note 9, art. 1(2). 
172 See Treas. Reg. § 301.6111-3. See also supra note 97. 
173 For further discussion on the possible complications associated with DAC 6, see Daniel W. 

Blum & Andreas Langer, At a Crossroads: Mandatory Disclosure under DAC-6 and EU Primary 

Law – Part 1, EUR. TAX’N 282 (2019); Daniel W. Blum & Andreas Langer, At a Crossroads: 

Mandatory Disclosure under DAC-6 and EU Primary Law – Part 2, EUR. TAX’N 313 (2019); 

Andrea Ballancin & Francesco Cannas, The ‘DAC 6’ and Its Compatibility with Some of the 

Founding Principles of the European Legal System(s), 29 EC TAX REV. 117 (2020); Arthur Bianco, 

DAC 6 and the Challenges Arising from Its Disclosure Obligation, 30 EC TAX REV. 8 (2021); Bart 

Peeters & Lars Vanneste, DAC 6: An Additional Common EU Reporting Standard? 12 WORLD TAX 

J. (2020); Bernhard Fiedler & Tino Duttiné, DAC 6: Developing a Common Notification Platform, 

in LIQUID LEGAL 493 (Kai Jacob, Dierk Schindler & Roger Strathausen eds., 2020); Rohit Reddy 

Muddasani, “Dual Citizenship and the Directive on Administrative Cooperation (DAC6) of the 

European Union,” Master’s thesis, (Norwegian School of Economics, 2021); Danilo Penetrante 

Ventajar, “Aggressive Measures for Aggressive Schemes: Human Rights Perspectives,” Master’s 

thesis, (Lund University, 2018); Nevia Čičin-Šain, New Mandatory Disclosure Rules for Tax 

Intermediaries and Taxpayers in the European Union – Another “Bite” into the Rights of the 

Taxpayer?, 11 WORLD TAX J. 77 (2019). Čičin-Šain, id., argues that the new intermediary reporting 

requirements may infringe on the right of a taxpayer to receive legal advice. Čičin-Šain also argues 

that the pace of DAC 6’s implementation frustrates the right to legal certainty and that when the 

taxpayer is required to report his/her right to not self-incriminate may be violated. For a discussion 

on alternatives to DAC 6, see Ola Nilsson, “Sweden’s implementation of DAC 6: A proportionate 

measure to prevent tax avoidance and evasion in the form of aggressive tax planning,” Master’s 

thesis, (Lund University, 2020). 
174 See Bianco, supra note 173; Rayssa Gutterres Costa, “Is there a collision between the EU 

Charter and the obligation to notify that intermediaries with legal professional privilege have under 

DAC 6?,” Master’s thesis, (Lund University, 2021); Elke Schwar, “Tipping of Justitia’s Scale: The 

Compatibility of Mandatory Disclosure for Intermediaries with the Right against Self-Incrimination 

and the Right to Confidentiality,” Master’s thesis, (Lund University, 2018); Edward-Hector Spiteri, 

The Maltese Implementation of DAC-6, NOVITA FISCALI (June 2021); David Russell & Toby 

Graham, The deep state and the assault on confidentiality, 25 TRUSTS & TRUSTEES 173 (Mar. 2019). 
175 See Izabela Andrzejewska-Czernek et al., How Do You Do It? MDR in Different EU Member 

States, 61 EUR. TAX’N 1, 25 (Aug. 30, 2021); Danish Mehboob, CJEU receives its first DAC6 case 

from Belgium high court, INT’L TAX REV. (Feb. 22, 2021). 
176 See, e.g., Tim Clappers & Philip Mac-Lean, Tax Avoidance in the Spotlight: The EU 

 



2022] MANDATORY DISCLOSURE RULES 147 
 

 

Second, regarding which transactions and arrangements are reportable, 

DAC 6 contains a substantial number of cross-border hallmarks. DAC 6 contains 

many of the generic and specific hallmarks commonly found in the MDRs of other 

jurisdictions.177 These include hallmarks for confidential arrangements, 

arrangements with fees contingent on the tax advantage, arrangements with 

standardized structures, and others.178 DAC 6 also includes a main benefit test for 

some, but not all, hallmarks.179 Importantly, however, DAC 6, following the Action 

12 recommendations, incorporates the cross-border hallmarks listed as examples in 

Action 12.180 While some of the MDRs predating DAC 6 contained cross-border 

features, none of them have adopted a regime as comprehensive as the ones in DAC 

6.181 Additionally, DAC 6 introduces categories of hallmarks that are targeted at 

arrangements that might be used to facilitate tax evasion by adopting the CRS 

MDRs described in the next part.182 DAC 6 also introduces hallmarks targeted at 

arrangements that bear transfer pricing risks.183 

Third, DAC 6 provides for a multilateral information exchange mechanism 

by requiring tax authorities of Member States to communicate any information 

 
Mandatory Disclosure Rules and Their Impact on Asset Managers and Private Equity, 21 FINANCE 

AND CAPITAL MARKETS 1, 9 (June 3, 2019) (discussing the impact of DAC 6 on the private equity 

industry). 
177 See DAC 6, supra note 9, Annex IV for a full list. Under DAC 6, only “cross-border 

arrangements” are reportable. However, the term “cross-border arrangement” is very broadly 

defined: any arrangement that has one or more participants that is resident in another jurisdiction, 

that is simultaneously resident for tax purposes in more than one jurisdiction, that carries on business 

in another jurisdiction through a permanent establishment (PE) situated therein (provided that the 

arrangement forms part of the business of the PE), or that carries on an activity in another jurisdiction 

without being resident for tax purposes or without creating a PE in that jurisdiction, and any 

arrangement that has a possible impact on the AEOI or the identification of beneficial ownership, 

would be covered. See the definition of “cross-border arrangements” in DAC 6, supra note 9, art. 

1(1). 
178 See DAC 6, supra note 9, Annex IV.  
179 See id. 
180 The cross-border hallmarks in DAC 6 include “1. An arrangement that involves deductible 

cross-border payments made between two or more associated enterprises where at least one of the 

following conditions occurs: (a) the recipient is not resident for tax purposes in any tax jurisdiction; 

(b) although the recipient is resident for tax purposes in a jurisdiction, that jurisdiction either: (i) 

does not impose any corporate tax or imposes corporate tax at the rate of zero or almost zero; or (ii) 

is included in a list of third-country jurisdictions which have been assessed by Member States 

collectively or within the framework of the OECD as being non-cooperative; (c) the payment 

benefits from a full exemption from tax in the jurisdiction where the recipient is resident for tax 

purposes; (d) the payment benefits from a preferential tax regime in the jurisdiction where the 

recipient is resident for tax purposes; 2. Deductions for the same depreciation on the asset are 

claimed in more than one jurisdiction. 3. Relief from double taxation in respect of the same item of 

income or capital is claimed in more than one jurisdiction. 4. There is an arrangement that includes 

transfers of assets and where there is a material difference in the amount being treated as payable in 

consideration for the assets in those jurisdictions involved.” DAC 6, supra note 9, Annex IV.C. 
181 The U.S., UK, South African, and Portuguese MDRs have had some cross-border elements. 

See, e.g., IRS Notice 2003-22 in which a cross-border transaction entitled Offshore Deferred 

Compensation Agreements is characterized as a listed transaction. However, many cross-border 

schemes are unlikely to be caught under these MDRs. See Action 12, supra note 22, at 68-69. 
182 See DAC 6, supra note 9, Annex IV.D. 
183 See DAC 6, supra note 9, Annex IV.E. 



148 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

obtained under their DAC 6 MDRs to the tax authorities of all other Member States. 

This is done by way of recording the information in a central repository within one 

month of the end of the quarter in which the information was filed.184 The 

information required to be exchanged includes the taxpayer’s personal and contact 

information, their TIN, the details of the tax transaction, information on the 

hallmarks involved in the transaction, and other additional information.185 

Therefore, DAC 6 has greatly expanded what should be reported, who 

should report, and how tax information should be shared between countries. It is 

possible that DAC 6 is too broad, and that the cross-border hallmarks, the transfer 

pricing hallmarks, and the CRS MDRs implemented in DAC 6 are capturing too 

many legitimate transactions and arrangements. The compliance burden is also 

likely to be significant,186 and is complicated by the fact that each Member State 

has implemented slightly different MDRs to comply with DAC 6.187 As such, EU 

tax advisors will need to navigate 27 slightly different MDRs, whereas U.S. tax 

advisors, for example, only need to understand one regime when working on 

domestic U.S. tax schemes.188 Ultimately, MDRs with the scope and reach of DAC 

6 have never been tested before, and it remains to be seen whether they effectively 

detect and deter the arrangements they seek to target. The limited data we currently 

have on the effects of DAC 6 indicates that DAC 6 is likely deterring tax avoidance 

but at a high cost.189  

 
184 See DAC 6, supra note 9, art. 1. 
185 See DAC 6, supra note 9, art. 1(2). 
186 For further discussion on the compliance burden of DAC 6, see Christian Kaeser, Mark Orlic 

& Arne Schnitger, DAC 6 Reporting Requirements Cause Compliance Headaches, 29 INT’L TAX 

REV. 22 (2018) (discussing the compliance burdens arising from DAC 6, especially in the years 

2018-2020 during which intermediaries and taxpayers faced significant reporting uncertainty as EU 

Member States worked out national MDRs to implement DAC 6).  
187 For a detailed breakdown of the differences between each EU Member State’s 

implementation of DAC 6, see Elisa Casi-Eberhard et al., One Directive, Several Transpositions: A 

Cross-Country Evaluation of the National Implementation of DAC6, 13 WORLD TAX J. 63 (2021) 

(proposing to reduce the compliance costs of 27 different DAC 6 regimes by creating a unified 

reporting schema for the whole of the EU as opposed to allowing each country develop its own 

reporting schema).  
188 For a further breakdown of the differences between U.S. MDRs and DAC 6, see Patricia A. 

Brown et al., Combating Aggressive Tax Planning through Disclosure: A Comparison of U.S. and 

EU Rules Applicable to Tax Advisors, 38 ABA TAX TIMES 10 (2019). 
189 See Alexander Edwards et al., Do Third-Party Cross-Border Tax Transparency 

Requirements Impact Firm Behavior? (Rotman School of Management, Working Paper No. 

3792342, 2021), https://ssrn.com/abstract=3792342 [https://perma.cc/J7XT-39UE] (documenting 

empirical evidence showing that DAC 6 has indeed deterred tax avoidance and that firms are now 

less likely to engage their auditors for tax-related services); Raluca Popa, DAC 6 Reporting, First 

Conclusions. What Should Companies Consider Next?, TAX MAG. 124 (2021) (finding that 

Romania only received 400 reports of cross-border transactions by Jan. 1, 2021, a number lower 

than expected). See also Andrzejewska-Czernek et al., supra note 175, which surveyed tax 

practitioners in 11 EU Member States for their thoughts on DAC 6 and its recent implementation. 

The surveyed tax professionals argued that taxpayer obligations under DAC 6 are 

“disproportionately burdensome,” that DAC 6 may violate the nemo tenetur principle and “the 

principle of equal treatment or the free movement of persons or capital under EU law,” that DAC 6 

may violate legal professional privilege, and that the reporting requirements of DAC 6 are far too 

vague.  



2022] MANDATORY DISCLOSURE RULES 149 
 

 

 

B. CRS MDRs 

 

For most of their existence, MDRs have been applied mainly as a measure 

to deter and detect basic forms of tax avoidance. However, in 2018 the OECD 

demonstrated the versatility of MDRs by applying them to CRS avoidance which, 

in essence, targets potential tax evasion by the taxpayers who circumvent CRS 

reporting.190 

In general, under CRS, financial institutions (FIs) are required to identify 

account holders who are foreign tax residents and report their information to the 

local tax authority.191 The local tax authority then transfers this information to the 

tax authority of the account holders’ jurisdiction of tax residence.192 The main 

purpose of facilitating the automatic exchange of information (AEOI) is to detect 

and deter tax evasion practices that involve the holding of undisclosed offshore 

financial assets.193 While AEOI under CRS is described by the OECD as “the 

largest exchange of tax information in history,”194 there are concerns that some tax 

evaders use loopholes and weaknesses in the CRS regime to circumvent CRS 

reporting and avoid detection.195 

The OECD published the CRS MDRs as part of efforts to address these 

loopholes and weaknesses, following the G7 Finance Ministers’ call for the OECD 

to “discuss possible ways to address arrangements designed to circumvent reporting 

under [CRS] or aimed at providing beneficial owners with the shelter of non-

 
190 See CRS MDRs, supra note 9. Tax evasion differs from tax avoidance in that the former 

typically involves intentionally misreporting or failing to report taxable income, assets or schemes 

to the authorities. Tax evasion is generally unambiguously illegal. Tax avoidance typically involves 

the exploitation of loopholes in tax requirements to minimize the tax burden without any falsified 

or inaccurate information submitted to the authorities. For further discussion, see Erich Kirchler et 

al., Everyday representations of tax avoidance, tax evasion, and tax flight: Do legal differences 

matter?, 24 J. ECON. PSYCHOL. 535 (2003); Paul Merks, Tax Evasion, Tax Avoidance and Tax 

Planning, 34 INTERTAX 272 (2006); Joel Slemrod, Tax Compliance and Enforcement, 57 J. ECON. 

LIT. 904 (2019) (providing a survey of recent empirical literature on tax evasion and tax 

compliance). 
191 See OECD, STANDARD FOR AUTOMATIC EXCHANGE OF FINANCIAL ACCOUNT INFORMATION 

IN TAX MATTERS (2014) [hereinafter CRS]. 
192 For further background about CRS, see OECD, STANDARD FOR AUTOMATIC EXCHANGE OF 

FINANCIAL ACCOUNT INFORMATION IN TAX MATTERS 9–10 (2d ed. 2017); see also WILLIAM H. 

BYRNES, LEXISNEXIS GUIDE TO FATCA & CRS COMPLIANCE (2020).  
193 See Markus Meinzer, Automatic Exchange of Information as the New Global Standard: The 

End of (Offshore Tax Evasion) History, in AUTOMATIC EXCHANGE OF INFORMATION AND 

PROSPECTS OF TURKISH-GERMAN COOPERATION (Leyla ATEŞ & Joachim ENGLISCH ed., 2017). 
194 OECD, Implementation of tax transparency initiative delivering concrete and impressive 

results, June 7, 2019, https://www.oecd.org/newsroom/implementation-of-tax-transparency-

initiative-delivering-concrete-and-impressive-results.htm, [https://perma.cc/729N-UKUA]. 
195 See, e.g., Peter A. Cotorceanu, Hiding in Plain Sight: How Non-U.S. Persons Can Legally 

Avoid Reporting Under Both FATCA and GATCA, TRUSTS & TRUSTEES 21: 1050–63 (2015); 

Andres Knobel & Markus Meinzer, “THE END OF BANK SECRECY”? BRIDGING THE GAP TO EFFECTIVE 

AUTOMATIC INFORMATION EXCHANGE: AN EVALUATION OF OECD’S COMMON REPORTING 

STANDARD, TAX JUST. NETWORK (2014); Andres Knobel & Frederik Heitmüller, CITIZENSHIP AND 

RESIDENCY BY INVESTMENT SCHEMES: POTENTIAL TO AVOID THE COMMON REPORTING STANDARD 

FOR AUTOMATIC EXCHANGE OF INFORMATION, TAX JUST. NETWORK (2018).  



150 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

transparent structures” as such arrangements frustrate the fight against tax 

evasion.196 CRS MDRs are a model set of rules that can be adopted by countries 

voluntarily. CRS MDRs adopt a disclosure framework similar to that recommended 

in Action 12 and by the EU Commission report that led to the drafting of DAC 6.197 

Under CRS MDRs, “CRS avoidance arrangements” and “opaque offshore 

structures” are required to be reported. A CRS avoidance arrangement is defined as 

“any arrangement for which it is reasonable to conclude…is designed to circumvent 

or is marketed as, or has the effect of, circumventing CRS Legislation or exploiting 

an absence thereof.”198 An opaque offshore structure “means a Passive Offshore 

Vehicle that is held through an Opaque Structure.”199 These hallmarks specifically 

identify arrangements which attempt to avoid CRS reporting or the identification 

of beneficial ownership.  

Similar to DAC 6, under CRS MDRs, “intermediaries” of CRS avoidance 

arrangements and opaque offshore structures are subject to the primary reporting 

obligation.200 An intermediary is defined under CRS MDRs as being promoters 

(“any person responsible for the design or marketing of a CRS Avoidance 

Arrangement or an Opaque Offshore Structure”) and service providers (“any person 

that provides Relevant Services in respect of a CRS Avoidance Arrangement or 

Opaque Offshore Structure in circumstances where the person providing such 

services could reasonably be expected to know that the Arrangement or Structure 

is a CRS Avoidance Arrangement or an Opaque Offshore Structure.”)201 “Relevant 

Services” include “assistance or advice with respect to the design, marketing, 

 
196 See G7 Finance Ministers, G7 Bari Declaration on Fighting Tax Crimes and Other Illicit 

Financial Flows (May 13, 2017) at 2, http://www.g7.utoronto.ca/finance/170513-crime.html, 

[https://perma.cc/7BRW-8PTZ]. 
197 See EUROPEAN COMMISSION, COMMISSION STAFF WORKING DOCUMENT IMPACT 

ASSESSMENT ACCOMPANYING THE DOCUMENT PROPOSAL FOR A COUNCIL DIRECTIVE AMENDING 

DIRECTIVE 2011/16/EU AS REGARDS MANDATORY AUTOMATIC EXCHANGE OF INFORMATION IN THE 

FIELD OF TAXATION IN RELATION TO REPORTABLE CROSS-BORDER ARRANGEMENTS (June 21, 2017), 

https://eur-lex.europa.eu/legal-content/EN/TXT/?uri= celex:52017SC0236, 

[https://perma.cc/SVY8-YLFP]. Under the CRS MDRs, the disclosure must include details of the 

arrangement, details of the users and other intermediaries in respect of the arrangement, and the 

jurisdictions in which the arrangement is made available for implementation, and must be made 

within 30 days after the intermediary makes the arrangement available for implementation. See CRS 

MDRs, supra note 9, Rules 2.2-2.3. Users are only subject to the disclosure requirement where no 

intermediary is obligated to make full disclosure in the jurisdiction, whether because the 

arrangement was developed in-house and no external assistance was sought, or because all 

intermediaries engaged were either not incorporated, managed or resident in the jurisdiction or were 

prevented from making full disclosure due to legal professional privilege. See CRS MDRs, supra 

note 9, Rules 2.1, 2.4, 2.6. 
198 CRS MDRs, supra note 9, Rule 1.1. 
199 CRS MDRs, supra note 9, Rule 1.2. (“[A] Passive Offshore Vehicle” means a Legal Person 

or Legal Arrangement that does not carry on a substantive economic activity supported by adequate 

staff, equipment, assets, and premises in the jurisdiction where it is established or is tax resident . . 

. .. An Opaque Structure is a Structure for which it is reasonable to conclude that it is designed to 

have, marketed as having, or has the effect of allowing, a natural person to be a Beneficial Owner 

of a Passive Offshore Vehicle while not allowing the accurate determination of such person’s 

Beneficial Ownership or creating the appearance that such person is not a Beneficial Owner.”). 
200 CRS MDRs, supra note 9, Rule 2.1. 
201 CRS MDRs, supra note 9, Rule 1.3. 



2022] MANDATORY DISCLOSURE RULES 151 
 

 

implementation or organisation of that Arrangement or Structure.”202 Thus, the 

reporting requirements under the CRS MDRs capture a broad set of intermediaries, 

including service providers who do not provide tax statements or tax-related 

services. 

The OECD outlined a system of automatic exchange of information 

obtained from intermediaries.203 This system is structured such that jurisdictions 

which receive disclosures detailing a CRS avoidance arrangement or an opaque 

offshore structure would automatically share that information with all other 

relevant jurisdictions that are also signatories to the CRS MDRs.204 Like the DAC 

6 system of automatic exchange, CRS MDRs provide for the exchange of taxpayer 

contact information, their TINs, the details of the arrangement, and information on 

which jurisdictions may be relevant parties to the arrangement.205 This information 

is to be shared only with the jurisdictions in which the taxpayer is resident for tax 

purposes.206 This differs from the DAC 6 approach where the information is made 

available to all Member States in a central repository.207 Importantly, if an 

intermediary has already disclosed an arrangement to one jurisdiction that has also 

implemented CRS MDRs and its automatic exchange of information framework, 

then the intermediary is not obligated to disclose again.208 

Adoption of CRS MDRs is voluntary at this stage. Countries are free to 

choose whether to adopt CRS MDRs, and if so, how the rules should be drafted and 

what penalties to impose. Some jurisdictions, such as the United Kingdom, have 

adopted CRS MDRs.209 The United Kingdom had initially adopted DAC 6 in 

January 2020, but following Brexit decided to opt-out of some sections of DAC 

6.210 According to the EU-UK Trade and Cooperation Agreement signed on 

December 30 2020, the UK is required only to implement the reporting standards 

agreed by the OECD.211 As a result, the United Kingdom has chosen to only require 

the reporting of hallmarks under Category D of DAC 6, which are the CRS MDRs’ 

hallmarks.212 While the reasoning for this reversal is not entirely clear, it is possibly 

related to concerns raised by British tax advisors about the complexities of DAC 6 

compliance and the United Kingdom’s aspiration to be a taxpayer-friendly 

jurisdiction.213 

 
202 CRS MDRs, supra note 9, Rule 1.4. 
203 See OECD, supra note 26. 
204 See id. at 5. 
205 See id. at 9. 
206 See id. 
207 See supra note 184 and the accompanying text. 
208 See CRS MDRs, supra note 9, at Rule 2.5(b) and (c). 
209 See Danish Mehboob, UK opts out of DAC6 to follow OECD rules after Brexit, 32 INT’L 

TAX REV. 11 (2021). 
210 See id. 
211 See EU-UK Trade and Cooperation Agreement, art. 383 (2020). The DOTAS rules continue 

to be in effect. 
212 See International Tax Enforcement (Disclosable Arrangements) Regulations 2020 (SI 

2020/25, as amended by SI 2020/713 and SI 2020/1649). 
213 See Mehboob, supra note 209 (“‘There will be many UK tax advisors very pleased to see 

this change, as the complexities of DAC6 were such that there was a fear many UK advisors with 

 



152 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

In addition to the United Kingdom, the Crown Dependencies (Jersey, 

Guernsey, and the Isle of Man) are in the process of implementing the CRS 

MDRs.214 Gibraltar and South Africa have also followed the United Kingdom’s 

lead and adopted the CRS MDRs.215 Interestingly, each of these jurisdictions chose 

to adopt the CRS MDRs over the EU’s DAC 6. Jersey gave two reasons for this 

decision. First, “[t]hese Model Rules reflect the international consensus in this 

area,” and second, “[t]he Model Rules are an OECD product. As such, Jersey can 

take part in discussions as to their future development.”216 Thus, despite the 

implementation of DAC 6 across all EU Member States, so far no outside 

jurisdictions have expressed interest in adopting that framework. Moreover, with 

the adoption of CRS MDRs in the British Crown Dependencies, it may only be a 

matter of time until other British territories such as the British Virgin Islands, the 

Cayman Islands, and Bermuda will come under pressure to adopt the CRS MDRs. 

This may influence other countries and territories to adopt the CRS MDRs as well. 

 

C. Other Countries 

 

 The expansion of MDRs in recent years has not been limited to Europe. 

Mexico217 and Argentina218 have each adopted MDRs based on the 

recommendations of BEPS Action 12. Both of these regimes build upon their 

OECD and DAC 6 precedents but also introduce some novel features of their own. 

 The Mexican MDRs came into force on January 1, 2020.219 These rules 

 
little international tax compliance experience might struggle to determine whether matters were 

reportable or not,’ he added” quoting Gary Ashford, vice president of the Chartered Institute of 

Taxation). See also George Bull, What happens to taxes if the UK becomes the Singapore of Europe, 

RSM (Jan. 2021) (describing the prospects of Prime Minister Boris Johnson’s objective to make 

Britain into a business-friendly destination with low taxes and light regulation). Nevertheless, the 

CRS MDRs also create compliance challenges and costs. See Paul F. Millen & Peter Cotorceanu, 

Forming financial intermediaries into a fifth column: the OECD MDRs for CRS avoidance, 25 

TRUSTS & TRUSTEES 422 (May 2019). 
214 See Taxation (Implementation) (International Tax Compliance) (Mandatory Disclosure 

Rules for CRS Avoidance Arrangements and Opaque Offshore Structures) (Jersey) Regulations 

2020, R&O.112/2020 (Sept. 9, 2020) for Jersey; Income Tax (Mandatory Disclosure Rules) 

Regulations 2019, Statutory Doc. No. 2019/0454 (Dec. 10, 2019) for the Isle of Man; The Income 

Tax (Approved International Agreements) (Implementation) (Mandatory Disclosure Rules) 

Regulations, 2020, Guernsey Statutory Instrument 2020 No. 2 (Mar. 11, 2020) for Guernsey. 
215 See Gibraltar Legal Notice No. 78 (2021); Ernst & Young, South Africa issues new 

regulations to implement the Common Reporting Standard (Oct. 16, 2020), 

https://www.ey.com/en_gl/tax-alerts/south-africa-issues-new-regulations-to-implement-the-

common-reporting-standard [https://perma.cc/Q4RF-V4PX]. 
216 Government of Jersey, Consultation on Implementation of Mandatory Disclosure Rules for 

CRS Avoidance Arrangements and Opaque Offshore Structures, Ministry of Treasury and 

Resources (Sept. 23, 2019), at 2. 
217 See Código Fiscal de la Federación [CFF], arts. 197-202 (Mex.) [hereinafter Mexico Federal 

Fiscal Code]. 
218 See General Resolution No. 4838/2020, Argentina Official Gazette (Oct. 20, 2020), 

https://www.boletinoficial.gob.ar/detalleAviso/primera/236310/20201020?busqueda=1, 

[https://perma.cc/S4QG-2KC3]. 
219 See Mexico Federal Fiscal Code, supra note 217. See also Ernst & Young, Taxpayers Should 

be Aware of Mexico’s New Reportable Transaction Obligation (Mar. 20, 2020). 



2022] MANDATORY DISCLOSURE RULES 153 
 

 

follow the recommendations of the OECD’s BEPS Action 12 but stop short of 

following the DAC 6 model.220 Unlike DAC 6 and the CRS MDRs, the Mexican 

MDRs impose reporting obligations only on tax advisors.221 The schemes 

reportable in Mexico include “anyone that generates or can generate, directly or 

indirectly, the obtaining of a tax benefit in Mexico” and possesses any one of 

fourteen characteristics.222 Many of these characteristics resemble DAC 6 and 

Action 12 hallmarks, although some are unique to Mexico.223 Notably, one 

characteristic covers structures that circumvent reporting under CRS or FATCA.224 

Once a scheme is found to be reportable, the tax advisor must provide their name 

and TIN, a description of the reportable scheme, the tax benefit obtained or 

expected, and other information.225 

 Argentina’s MDRs were adopted in October 2020 and follow the 

recommendations of BEPS Action 12. Under these MDRs, there is a parallel 

reporting requirement on both taxpayers and tax advisors.226 These MDRs require 

the reporting of both domestic and cross-border transactions that result in a tax 

advantage or benefit and have certain characteristics.227 In cases where multiple 

parties could report, all must report.228 While this reporting obligation is somewhat 

broader than Mexico’s, it also does not include intermediaries other than tax 

advisors. The disclosure must include the information of the scheme participants, a 

description of the way in which the tax advantage or any other benefit was created, 

and the applicable legal and regulatory provisions, including foreign regulations.229 

 The adoption of DAC 6 in the EU, CRS MDRs in several countries, and 

new MDRs in Mexico and Argentina indicates that MDRs are continuing to find 

willing and ready policymakers to implement them in different countries around 

the globe. Moreover, all of these new MDRs contain significant cross-border 

components in line with the general trend of third-generation MDRs. MDRs seem 

poised to continually evolve and proliferate across the globe. 

 

IV. TRENDS IN THE DEVELOPMENT OF MDRS 

 

 Thus far, we have described the development of MDRs since the 1980s. In 

this Part, we identify three main trends in the development of MDRs over this 

period. First, MDRs have evolved from targeting specific tax schemes to covering 

a large set of tax avoidance arrangements. Second, the group of persons required to 

 
220 For a detailed breakdown of the differences between Mexico’s MDRs and DAC 6, see 

Kimberly Tan Majure et al., INSIGHT: Mandatory Disclosure Rules in the European Union and 

Mexico, BLOOMBERG TAX (Oct. 2020). 
221 See id.  
222 Mexico Federal Fiscal Code, supra note 217, art. 199. 
223 See Majure et al., supra note 220. 
224 See Mexico Federal Fiscal Code, supra note 217, art. 199. 
225 See id. at art. 200. 
226 See PricewaterhouseCoopers, Argentina adopts broad informative regime requiring 

domestic and international tax planning disclosures (Oct. 27, 2020); see also General Resolution 

No. 4838/2020, supra note 218, art. 6. 
227 See General Resolution No. 4838/2020, supra note 218, arts. 3-4. 
228 Id. 
229 See id. at art. 11. 



154 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

report has similarly expanded to a broad set of intermediaries under recent MDRs. 

This is part of a larger effort to target the enablers of tax avoidance and evasion. 

Finally, MDRs have evolved from a domestic measure conceived and implemented 

by national governments to a multilateral regime designed and promoted by 

international institutions. The newest MDRs are the product of a coordinated 

international campaign against cross-border tax avoidance and evasion.  

 

A. Expansion of What Should Be Reported 

 

 Since the 1980s, MDRs have changed with respect to what needs to be 

reported. MDRs began in the United States and Canada with a specific purpose: to 

stymie the proliferation of mass-marketed tax shelters for individuals.230 Tax 

shelters were defined using specific formulas and did not extend to corporate 

taxpayers and other entities.231 They were not intended to wholly reinvent the 

government’s anti-tax-avoidance methods and create a comprehensive reporting 

regime for multiple types of tax avoidance by intermediaries.232  

Over time, the reach of MDRs has expanded. In the early 2000s, listed 

transactions and hallmarks were introduced, which covered not just tax shelters, but 

also other forms of tax avoidance and, in particular, corporate tax avoidance.233 The 

maintenance of a list of reportable transactions that can be expanded over time has 

provided governments with a valuable tool to flexibly respond to the creativity of 

aggressive tax planners and sophisticated intermediaries.234 It also means that, as 

each year goes by, more and more transactions have become reportable.235 

Moreover, listed hallmarks ensure that even if a certain type of tax planning 

transaction is not explicitly identified by the government as reportable, it will still 

need to be reported if it contains certain characteristics common to tax avoidance 

schemes.  

Nevertheless, the enumerated hallmarks of the early 2000s were far less 

broad than the hallmarks of more recent MDRs, such as DAC 6.236 The result is 

that the newest MDRs capture many different types of transactions that were not 

reportable under previous MDRs.237 Additionally, DAC 6 and CRS MDRs are 

reimagining how MDRs can be applied to tax enforcement. Both regimes contain 

hallmarks that target CRS avoidance arrangements, which might be associated with 

 
230 See Joint Comm. on Taxation of the U.S. Congress, supra note 42, at 5-8. 
231 See supra notes 58, 72 and Part I, supra. 
232 See supra Part I. 
233 See supra Part II. 
234 See Joshua D. Blank, Overcoming Overdisclosure: Toward Tax Shelter Detection, 56 UCLA 

L. REV. 1629, 1677 (2008) (noting, with respect to listed transactions, that “[t]he status quo 

approach…provides the IRS with flexibility to determine what changes, if any, it should make to its 

original designation of a listed transaction.”). 
235 In the United States, for example, of the 36 listed transactions reportable in 2021; only 23 of 

them were reportable in 2003. Thus, 13 new transactions have become reportable since 2003. See 

https://www.irs.gov/businesses/corporations/listed-transactions [https:// perma.cc/XRH8-C7YZ]. 
236 See supra Parts II and III. 
237 See Bianco, supra note 173, at 15 (“Potential intermediaries have indeed been complaining 

since the publication of [DAC 6] that the hallmarks it contains are conceivably too wide or too vague 

to work as intended, and may capture structures that are not constitutive of tax avoidance.”). 



2022] MANDATORY DISCLOSURE RULES 155 
 

 

tax evasion, and tax avoidance transactions, which have been the primary focus of 

MDRs since their inception.238 

 Overall, these changes could be described as a shift away from a rule-based 

approach, which tries to identify and address specific weaknesses in the tax system 

(initially by using formulas to determine which tax schemes are reportable), toward 

a standard-based, anti-avoidance approach.239 This standard-based approach is 

reflected in the extensive use of generic hallmarks and the incorporation of the main 

benefit test in newer MDRs.240 The CRS MDRs, for example, make direct 

references to the intended policy of CRS when determining what arrangements 

must be reported.241 Thus, MDRs are becoming broad anti-avoidance standards and 

are imposing reporting obligations on a wide variety of transactions that violate the 

intent of tax laws. This is consistent with an overall trend of expanding MDRs 

which has been identified over the past four decades.  

The expansion of the scope of MDRs to address various types of tax 

avoidance and evasion is part of a broader movement in international tax policy. 

As noted above, the BEPS project and the recent agreement on a global minimum 

tax under BEPS 2.0 aim to curb corporate tax avoidance.242 FATCA and CRS aim 

to detect and deter tax evasion associated with undisclosed offshore financial 

accounts.243 It is, therefore, unsurprising that the BEPS project included in Action 

12 recommendations for countries to use MDRs more extensively. Similarly, it is 

unsurprising that DAC 6 and CRS MDRs went beyond the Action 12 

recommendations to utilize MDRs in the fight against cross-border tax avoidance 

and evasion.244 

 

B. Expansion of Who Should Report 

 

 In addition to expanding the criteria for what needs to be reported, MDRs 

have broadened the requirements for who needs to report. The original tax shelter 

registration rules narrowly targeted promoters and organizers of tax shelters.245 In 

the early 2000s, however, the U.S. expanded reporting obligations to material 

 
238 See supra Part III.  
239 For further discussion on general anti-avoidance rules, see Christophe J. Waerzeggers & 

Cory Hillier, Introducing a General Anti-Avoidance Rule (GAAR), IMF TECHNICAL NOTE (2016). 

For a discussion on the policy choice between rules and standards, see Louis Kaplow, Rules Versus 

Standards: An Economic Analysis, 42 DUKE L. J. 557-629 (1992); Eric A. Posner, Standards, Rules, 

and Social Norms, 21 HARV. J. L. & PUB. POL’Y 101 (1997). 
240 See supra notes 166, 177-179, 241 and the accompanying text. 
241 The generic hallmarks under the CRS MDRs provide that an “Arrangement therefore 

circumvents CRS Legislation where it avoids the reporting of CRS information to the jurisdiction(s) 

of residence of a taxpayer in a way that undermines its intended policy, including by: exploiting the 

absence of CRS Legislation or inadequate implementation of such legislation; exploiting the 

absence of a CRS exchange agreement with one or more jurisdiction(s) of tax residence of such 

taxpayer; undermining or exploiting weaknesses in the due diligence procedures applied by a 

Financial Institution under CRS Legislation; or otherwise undermining the intended policy of the 

CRS.” CRS MDRs, supra note 9, at 24 (emphasis added). 
242 See supra note 33. 
243 See supra notes 33, 191-193 and the accompanying text. 
244 See Action 12, supra note 22, and Parts III.A and III.B, supra and the accompanying text. 
245 See supra Part I. 



156 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

advisors,246 such as lawyers and accountants, thereby capturing a much broader set 

of professionals who provide tax advice or make tax statements.247 Finally, the 

newest MDRs have expanded reporting obligations to a variety of intermediaries 

that may only play a minor or tangential role in a transaction and do not provide 

tax-related services or make tax statements.248 In the case of DAC 6, intermediaries 

assisting with the implementation of a reportable arrangement must report if they 

are reasonably expected to know that the arrangement is reportable.249 This means 

that lawyers, trustees, investment advisors, corporate service providers, and other 

intermediaries may be subject to reporting requirements even if they never provide 

tax services to their clients.250 They cannot avoid this obligation by turning a blind 

eye or excluding tax-related services from the scope of services they provide. 

 These changes in reporting obligations reveal a shifting focus among 

governments and international organizations toward regulating and deterring the 

professional service providers that enable tax avoidance and evasion schemes. A 

requirement to report acts as a dissuasive tool because it consumes intermediaries’ 

time and resources,251 while simultaneously increasing the likelihood of audits and 

investigations against the intermediaries and their clients.252 Underlying this shift 

is a position that by targeting the enablers, not just the taxpayers, tax authorities can 

more effectively deter tax avoidance and evasion.253 The centrality of 

intermediaries is underscored by literature and recent document leaks which have 

shown that lawyers, accountants, investment advisors, and other intermediaries 

form a large network of professional enablers that supply arrangements that could 

be used for tax avoidance and evasion.254 Thus, this shift represents an effort on 

behalf of the tax authorities to simultaneously regulate various industries that could 

 
246 A material advisor must play a tangible role in a tax transaction. See supra note 96 and the 

accompanying text. 
247 See Part II.A, supra. 
248 See supra notes 169-170 and the accompanying text. 
249 See id. 
250 See id. 
251 See Schler, supra note 7 (“The reporting rules imposed on tax advisers for book-tax and loss 

transactions impose a considerable burden on tax advisers involved in normal business transactions. 

Every law firm in the country has been required to make an enormous effort to develop, and ensure 

ongoing compliance with, procedures relating to those transactions. Given the penalties for 

noncompliance, that effort usually involves considerable partner time.”). 
252 See Blank, supra note 234, at 1641 (“Mandatory disclosure is thus designed to provide an 

important ‘audit roadmap’ to the IRS. For example…under current law a taxpayer is now required 

to alert the IRS if the taxpayer uses a tax strategy sold by a tax shelter promoter who promised a 

money-back guarantee in the event of an audit. The required disclosure statement may lead the IRS 

agent who initially reviews this tax return to select it for audit and quickly issue an information 

document request to the taxpayer.”). 
253 See Action 12, supra note 22, at 27. 
254 See Prem Sikka & Hugh Willmott, The tax avoidance industry: accounting firms on the 

make, 9 CRIT. PERSPECT. INT’L BUS. 415, 431 (2013); James S. Henry, The price of offshore 

revisited: new estimates for missing global private wealth income inequality and lost taxes, TAX 

JUST. NETWORK (2012); Nicholas J. Lord, Liz J. Campbell & Karin van Wingerde, Other People’s 

Dirty Money: Professional Intermediaries, Market Dynamics and the Finances of White-collar, 

Corporate and Organized Crimes, 59 BRIT. J. CRIMINOLOGY 1217 (2019). For a more detailed 

analysis of the market for tax avoidance, see Kai A. Conrad, Dynamics of the Market for Corporate 

Tax-Avoidance Advice, 123 SCAND. J. ECON. 267 (2019). 



2022] MANDATORY DISCLOSURE RULES 157 
 

 

be involved in the design, marketing or implementation of reportable arrangements.  

Intermediary reporting and third-party reporting in general also have other 

advantages in addition to deterring professionals from enabling tax schemes. In 

general, tax literature in recent years has emphasized the role third parties can play 

in tax compliance.255 Third-party reporting ensures that the tax authorities receive 

a more accurate and complete picture of a tax scheme which allows them to take 

faster action against abusive schemes.256 Third-party reporting can help deter 

taxpayers from demanding tax avoidance and evasion products in the first place, 

since they know such schemes are now more likely to be detected by the 

government. 257  

Moreover, the shifting focus of MDRs to a larger set of intermediaries is 

representative of a broader change in the priorities of tax authorities and 

international organizations, which are increasingly using an assortment of policy 

tools to hold the enablers of tax avoidance accountable. The United Kingdom, for 

example, has implemented penalties and other consequences for intermediaries that 

enable tax avoidance behavior.258 Additionally, the OECD has published several 

reports outlining how intermediaries enable tax avoidance and has proposed various 

solutions to deter them from engaging in problematic behavior.259 On the whole, 

 
255 See Paul Carrillo, Dina Pomeranz & Monica Singhal, Dodging the Taxman: Firm 

Misreporting and Limits to Tax Enforcement, 9 AM. ECON. J.: APPLIED ECON. 144 (2017) at 144; 

Leandra Lederman, Statutory Speed Bumps: The Roles Third Parties Play in Tax Compliance, 60 

STAN. L. REV. 695 (2007) (describing how third parties help ensure compliance but can, under 

certain conditions, undermine it); Bibek Adhikari, James Alm & Timothy F. Harris, Information 

Reporting and Tax Compliance, 110 AEA PAPERS & PROC. 2020 162 (2020) (discussing the 

introduction of third-party reporting and its impacts on a particular area of taxation); James Alm, 

John A. Deskins & Michael McKee, Third-Party Income Reporting and Income Tax Compliance, 

ANDREW YOUNG SCH. POL’Y STUD. RSCH. PAPER SERIES NO. 06-35 (2006); Henrik Jacobsen 

Kleven et al., Unwilling or Unable to Cheat? Evidence from a Tax Audit Experiment in Denmark, 

79 ECONOMETRICA 651 (2011); Dina Pomeranz, No Taxation without Information: Deterrence and 

Self-Enforcement in the Value Added Tax, 105 AM. ECON. REV. 2539 (2015); James Alm, 

Measuring, Explaining, and Controlling Tax Evasion: Lessons from Theory, Experiments, and Field 

Studies, TUL. ECON. WORKING PAPER SERIES (July 2012). 
256 See Action 12, supra note 22, at 22; Mark D. Phillips, Individual Tax Compliance and 

Information Reporting: What do the U.S. Data Show?, 67 NAT’L TAX J. 531 (2014) (showing that 

third-party reporting deters taxpayers from underreporting their income). 
257 See Action 12, supra note 22, at 27; Leandra Lederman, Reducing Information Gaps to 

Reduce the Tax Gap: When Is Information Reporting Warranted, 78 FORDHAM L. REV. 1733, 1738-

39 (2010); Danshera Cords, Tax Protestors and Penalties: Ensuring Perceived Fairness and 

Mitigating Systemic Costs, 2005 BYU L. REV. 1515, 1542-43 (2005); Henrik Jacobsen Kleven, 

Claus Thustrup Kreiner & Emmanuel Saez, Why Can Modern Governments Tax So Much? An 

Agency Model of Firms as Fiscal Intermediaries, 83 ECONOMICA 219 (2016). 
258 See United Kingdom’s Finance (No. 2) Act 2017, sched. 16, which outlines new penalties 

for tax avoidance intermediaries. In this law intermediaries are classified as “enablers” of tax 

avoidance, which are defined as designers, managers, marketers, enabling participants, or financial 

enablers of the tax avoidance arrangements.  
259 See, e.g., OECD, STUDY INTO THE ROLE OF TAX INTERMEDIARIES (2008), which identified 

intermediaries as a significant problem in the area of tax avoidance. The report recommended 

various methods for reining in the intermediaries that enable tax avoidance including future 

compliance agreements, penalties, non-monetary sanctions (e.g., “injunctions to stop the promotion 

of a scheme, and censures, suspension or disbarment from practice under professional conduct 

 



158 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

however, the EU has been the leader of this trend. The EU has developed its 

aggressive stance against the intermediaries of abusive tax behavior out of a 

growing sense that intermediaries were facilitating, and indeed encouraging, tax 

avoidance.260 For example, in July 2016 the European Parliament specifically 

condemned intermediaries as playing a crucial role in tax avoidance, and also 

suggested the imposition of mandatory disclosure requirements on intermediaries 

as one solution to counter their activities.261 

Moreover, when suggesting that the European Union adopt MDRs, the 

Economic and Financial Affairs Council (ECOFIN) of the European Council 

specifically identified intermediaries as a target and drew inspiration from BEPS 

for ways to combat them.262 The aggressive stance against intermediaries adopted 

by the EU was also influenced by the release of the Panama Papers in April 2016 

at around the same time these proposals were being developed.263 In the eyes of the 

EU, the Panama Papers shed light on the potentially dangerous role intermediaries 

were playing in enabling tax avoidance.264 Moreover, the historical legacy of the 

 
rules”), and general anti-avoidance rules. The report also identified the MDRs of Canada, South 

Africa, the United Kingdom, and United States as highly effective ways of deterring intermediaries 

from facilitating tax avoidance schemes (“In these four countries, much of the obligation for 

disclosure falls on the tax intermediary. The experiences of countries using disclosure regimes are 

that they have a significant deterrent effect and reduce the attractiveness of aggressive tax planning. 

They directly affect the economic attractiveness of aggressive tax planning, significantly reducing 

the time taken by the revenue body to detect a scheme and embark on a response (either legislative 

or through the courts). For the tax intermediary, the period in which professional fees can be earned 

is reduced; for taxpayers, a swifter response means a reduced period in which tax advantages 

accrue”). See id. at 19. This report was itself inspired by the Seoul Declaration, in which 39 

economies and organizations agreed to find ways to counter tax avoidance including by “examining 

the role of tax intermediaries (e.g.,., law and accounting firms, other tax advisors and financial 

institutions) in relation to non-compliance and the promotion of unacceptable tax minimization 

arrangements.” OECD, SEOUL DECLARATION, at 4 (Sept. 2006). See also OECD, TACKLING 

AGGRESSIVE TAX PLANNING THROUGH IMPROVED TRANSPARENCY AND DISCLOSURE – REPORT ON 

DISCLOSURE INITIATIVES, supra note 165; OECD, ENDING THE SHELL GAME: CRACKING DOWN ON 

THE PROFESSIONALS WHO ENABLE TAX AND WHITE COLLAR CRIMES (2021) (describing how 

countries can individually and collectively identify, disrupt, and deter “professional enablers,” i.e. 

intermediaries, from promoting and implementing tax avoidance schemes). The report identifies 

MDRs as one of the primary tools for deterring tax avoidance schemes and encourages their 

implementation. In particular, the CRS MDRs, DAC 6, and BEPS Action 12 are all listed as models 

that countries may consider when designing their MDRs.  
260 See European Commission, supra note 197, at 5-6. 
261 See European Parliament Special Committee on Tax Rulings, 2016/2038(INI), Tax Rulings 

and Other Measures Similar in Nature or Effect (July 6, 2016) (“Members regretted deeply that 

some banks, tax advisers, law and accounting firms and other intermediaries have been instrumental 

and have played a key role in designing aggressive tax planning schemes for their clients…[The 

Commission] was also asked to come forward with a legislative proposal introducing a mandatory 

disclosure requirement for banks, tax advisers and other intermediaries concerning complex 

structures and special services that are linked to jurisdictions included on the common EU list of tax 

havens.”). 
262 See COUNCIL OF THE EUROPEAN UNION, COMMISSION COMMUNICATION ON AN EXTERNAL 

STRATEGY FOR EFFECTIVE TAXATION AND COMMISSION RECOMMENDATION ON THE 

IMPLEMENTATION OF MEASURES AGAINST TAX TREATY ABUSE, 9452/16 (2016). 
263 See European Commission, supra note 197, at 5. 
264 See id. 



2022] MANDATORY DISCLOSURE RULES 159 
 

 

2008 financial crisis and the subsequent Eurozone crisis likely played a role in 

motivating European officials to take a strong anti–tax avoidance stance.265 These 

developments help explain the EU’s expansive approach to intermediary reporting. 

In summary, there is a growing consensus among countries and institutions 

that one of the best ways to ensure global tax equity is to target the enablers of tax 

avoidance and evasion. MDRs are increasingly used to discourage a wide variety 

of professional service providers from acting as such enablers. 

 

C. Internationalization of MDRs  

 

 From their domestic origins, MDRs have evolved into a potent multilateral 

instrument to counter cross-border tax avoidance and evasion. The first MDRs were 

initiated and developed by national governments primarily to deal with domestic 

tax avoidance issues. This was true of both the tax shelter registration rules of the 

1980s and the reportable transaction disclosure regimes of the 2000s and early 

2010s.266 However, more recent developments in MDRs have been driven by 

international and supranational organizations: the OECD and the EU. This started 

with the OECD’s BEPS Action 12 in 2015, which was soon thereafter taken up in 

an expanded form by the EU and applied to its 27 Member States.267 Additionally, 

the OECD designed the CRS MDRs, which are now being adopted in an increasing 

number of jurisdictions.268 

The increasingly multilateral nature of anti-tax avoidance policy stems from 

a realization that many tax schemes rely on structures and transactions involving 

more than one country.269 This could be the result of the substantial increase in 

cross-border activities and the transfer of assets across jurisdictions in the years 

since the implementation of the first-generation MDRs in the 1980s.270 In order to 

combat cross-border tax avoidance and evasion, countries have increasingly been 

collaborating to develop and implement measures that target international tax 

schemes, as seen in BEPS, CRS and other initiatives.271 

The internationalization of MDRs has affected what needs to be reported, 

who needs to report, and how information is exchanged between jurisdictions. First, 

DAC 6 and the CRS MDRs focus on cross-border tax issues.272 While some older 

 
265 For further discussion on the historical origins behind the EU’s aggressive implementation 

of the BEPS proposals, see Sigrid J.C. Hemels, Implementation of BEPS in European Union hard 

law, 67 RITSUMEIKAN ECON. REV. 85 (July 2018); Communication from the Commission to the 

European Parliament and the Council, An Action Plan to strengthen the fight against tax fraud and 

tax evasion, COM/2012/0722 final, (Dec. 6, 2012).  
266 See supra Part I and Part II. 
267 See supra Part III.B. 
268 See id. 
269 See Action 12, supra note 22, at 3; European Commission, supra note 197, at 4; U.S. Gov’t 

Accountability Office, supra note 99, at 9 (warning that abusive tax avoidance transactions have 

become increasingly international). 
270 See Action 12, supra note 22, at 3; European Commission, supra note 197, at 4; U.S. Gov’t 

Accountability Office, supra note 99, at 9. 
271 See Mason, supra note 11, at 355-67 (describing the evolution of international cooperation 

in tax enforcement since the 2008 financial crisis with a particular focus on BEPS). 
272 See supra Part III. 



160 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

MDRs contain a handful of cross-border provisions, none have tackled this issue as 

comprehensively as DAC 6.273 Additionally, the CRS MDRs contain hallmarks 

targeting CRS Avoidance Arrangements and Opaque Offshore Structures.274 Each 

of these hallmarks, by definition, deal with cross-border arrangements. Finally, the 

new MDRs of Mexico and Argentina require the reporting of both domestic and 

cross-border transactions with certain characteristics.275 Thus, the schemes that 

must be reported under the newest MDRs have a greater focus on cross-border 

transactions than older MDRs. 

Second, the multilateral nature of the newest MDRs affects the types of 

intermediaries that are required to report. Under most earlier regimes, only 

domestic intermediaries were required to report.276 However, under DAC 6 an 

intermediary that has ties to any EU Member State277 is required to report a 

transaction even if the transaction occurs in a Member State other than that which 

the intermediary has ties to.278 Moreover, under DAC 6, intermediaries have a 

primary reporting obligation to their home Member State even if the transaction 

occurred in a different Member State.279 Under the CRS MDRs, an intermediary 

may be required to report to their home jurisdiction if they have not already reported 

to another jurisdiction in which they have a branch and where the reportable 

services were rendered.280 Thus, both DAC 6 and the CRS MDRs enable tax 

authorities to identify intermediaries in other countries that are providing services 

to local taxpayers. 

Third, multilateral MDRs are facilitating the creation of international 

systems of information exchange. In order for the aforementioned reporting 

schemes to function effectively so that the interested tax authority receives the 

relevant information, it is necessary for countries to have in place a method for 

sharing tax information.281 For example, if an intermediary in Spain reports on a 

tax arrangement undertaken by a taxpayer that is resident in Germany, then it is 

necessary for some mechanism to be in place for the information to be transmitted 

from Spain to the relevant tax authority in Germany. Both DAC 6 and the CRS 

MDRs incorporate methods for jurisdictions to share data with each other.282 Under 

these regimes, intermediaries are required to report to only one country which then 

shares this information with other countries within the same regime.283 

These changes are part of broader trends in international tax policy. As 

 
273 See supra note 181. 
274 See supra Part III.B. 
275 See supra Part III.C. 
276 See supra Part I and Part III. 
277 See supra note 170; DAC 6, art. 1(1). 
278 See id. 
279 See DAC 6, supra note 9, art. 1(2). 
280 See CRS MDRs, supra note 9, rule 2.1. 
281 See, e.g., European Commission, supra note 197, at 4. 
282 For DAC 6, see DAC 6, supra note 9, at art. 1. For the CRS MDRs, see OECD, supra note 

26, and the accompanying text for note 203. 
283 See id. Under the CRS MDRs it is the responsibility of the country which received the 

disclosure to share that information with all other relevant countries (that are also part of CRS and 

the CRS MDRs). Under DAC 6, the disclosure information is recorded in a central repository that 

is open to all Member States of the EU. 



2022] MANDATORY DISCLOSURE RULES 161 
 

 

noted by Ruth Mason, recent developments in international policymaking, 

particularly BEPS, have transformed and multilateralized international taxation.284 

International tax policy is becoming more multilateral and the OECD is continuing 

to play a leading role in the setting of global tax norms.285 These observations are 

consistent with the changes we identify in MDRs. In particular, norm-setting for 

MDRs is being led by the OECD and EU, and MDRs are promoting a multilateral 

mechanism to address international tax challenges. Additionally, multilateral 

MDRs increase transparency across jurisdictions, complementing other 

transparency enhancing regimes such as CRS, country-by-country reporting, and 

the automatic exchange of tax rulings.286  

 

V. THE PATH AHEAD FOR MDRS 

 

MDRs have grown and expanded over the past four decades with a rapid 

acceleration of these trends in the past six years. As we have shown in the previous 

part, these trends are directly tied to broader movements in international tax policy. 

If these broader international trends continue, it is likely that the expansion, 

proliferation, and internationalization of MDRs will continue as well.  

Several factors may accelerate the adoption of MDRs. One factor is 

potential pressure from the OECD. Although the adoption of the CRS MDRs is 

currently voluntary, countries may come under pressure from the OECD to adopt 

CRS MDRs or a similarly effective anti-CRS avoidance measure. CRS already 

requires that jurisdictions implementing CRS have “rules to prevent any Financial 

Institutions, persons or intermediaries from adopting practices intended to 

circumvent the reporting and due diligence procedures.”287 Thus, the OECD may 

require in the future that CRS-implementing countries adopt either the CRS MDRs 

or similarly effective rules against CRS avoidance. Such a requirement would likely 

result in a wide-scale international adoption of CRS MDRs. The fact that the EU 

Member States, the United Kingdom, Jersey, Guernsey, and the Isle of Man have 

all adopted or are in the process of adopting the CRS MDRs may indicate that these 

rules are on track to becoming a widely adopted international tax standard.288  

Another factor is a potential EU blacklisting of jurisdictions that do not 

adopt certain MDRs.289 For example, the EU may announce in the future that 

 
284 See Mason, supra note 11. 
285 See id.  
286 For further discussion on CRS, CbCR, and automatic exchange of tax rulings, see CRS, 

supra note 191; Elisa Casi, Christoph Spengel & Barbara M.B. Stage, Cross-border tax evasion 

after the common reporting standard: Game over? 190 J. PUB. ECON. (2020); Michelle Hanlon, 

Country-by-Country Reporting and the International Allocation of Taxing Rights, 72 BULL. FOR 

INT’L TAX’N (2018); Anjana Haines, No more secret tax rulings in the EU?, INT’L TAX REV. (2017).  
287 CRS, supra note 191, at 61. 
288 See Leigh-Alexandra Basha, Overview on recent developments for the legislation, 

regulatory and anti-money laundering US update, 25 TR. & TRUSTEES 138, 146 (Feb. 2019) 

(“Although countries are not obligated to adopt the Mandatory Disclosure Rules, it appears likely, 

that, over time, many countries will adopt them and that they will become part of the international 

norms.”). 
289 Council Conclusions on the Criteria for and Process Leading to the Establishment of the EU 

 



162 COLUMBIA JOURNAL OF TAX LAW [Vol: 13:2  

 

 

jurisdictions that do not adopt CRS MDRs would be blacklisted as non-cooperative 

tax jurisdictions. The EU has shown that it is willing to use the blacklisting threat 

as a means to force other jurisdictions to adopt EU tax norms, which now include 

CRS MDRs as part of DAC 6.290 

Nevertheless, even without OECD and EU pressure, it is possible that more 

countries will adopt new MDRs or expand their existing MDRs of their own 

volition. For example, Mexico and Argentina have recently adopted their own 

MDRs, and Australia and Japan are discussing introducing MDRs.291 It will be 

interesting to see whether the United States or Canada, which already have their 

own set of second-generation MDRs, will adopt more expansive rules. Thus far, the 

United States has expressed little interest in expanding its MDRs.292 Moreover, 

given that the United States utilizes its own FATCA regime instead of CRS, it 

should not be expected to adopt CRS MDRs.293 Thus, despite initiating and leading 

the expansion of MDRs for decades, it does not seem likely that the United States 

will participate in this latest chapter in the evolution of MDRs. Canada, however, 

has indicated that it plans to expand its MDRs to adjust them more closely to BEPS 

Action 12.294  

In addition to these developments, there is also the possibility of the 

development and adoption of a new global standard for MDRs that focuses on 

international tax issues. The international community has not yet rallied behind a 

single agreed-upon standard for MDRs to address cross-border tax challenges. 

Instead, the EU and various countries have innovated their own MDRs. It is 

possible that, similar to other harmonization and cooperation trends in international 

taxation, more countries will seek to design and adopt an international standard for 

 
List of Non-Cooperative Jurisdictions for Tax Purposes, 2016 O.J. (C 461) 2. For a description of 

the EU blacklisting process, see Giuseppe Melis & Alessio Persiani, The EU Blacklist: A Step 

Forward but Still Much to Do, EC TAX REV. 2019-5 (2019). For a description of some of the 

consequences of an EU blacklisting, see Aija Rusina, Name and shame? Evidence from the 

European Union tax haven blacklist, INT’L TAX & PUB. FIN. 27 (2020). 
290 See European Council, Taxation: EU list of non-cooperative jurisdictions (last reviewed on 

Oct. 7, 2021), https://www.consilium.europa.eu/en/policies/eu-list-of-non-cooperative-

jurisdictions/ [https://perma.cc/747J-EXKR].  
291 See 2016-17 Australian Budget Report, Making Our Tax System More Sustainable (May 

2016) at 11; EY Global, The Latest on BEPS and Beyond – December 2019, (Dec. 17, 2019). For 

further discussion on Australia, see Oguttu & Kayis-Kumar, supra note 80; Annet Wanyana Oguttu 

& Ann Kayis-Kumar, Curtailing Aggressive Tax Planning: The Case for Introducing Mandatory 

Disclosure Rules in Australia (Part 2) - Cues from the United Kingdom and South Africa, 17 

EJOURNAL TAX RES. 233 (2020); Irma Johanna Mosquera Valderrama, The OECD-BEPS Measures 

to Deal with Aggressive Tax Planning in South America and Sub-Saharan Africa: The Challenges 

Ahead, 43 INTERTAX 615 (2015). 
292 See Isabelle Ioannides, EU-US trade and investment relations: Effects on tax evasion, money 

laundering and tax transparency – Ex-Post Impact Assessment, EUR. PARL. RSCH. SERVICE, at 18 

(Mar. 2017) (“Existing US law has statutory and regulatory disclosure rules for aggressive tax 

planning. There are no active proposals for change.”). 
293 For further discussion on the US’ relationship with CRS, see Rachel E. Brinson, Is the United 

States Becoming the New Switzerland: Why the United States' Failure to Adopt the OECD's 

Common Reporting Standard Is Helping It Become a Tax Haven, 23 N.C. BANKING INST. 231 

(2019); Basha, supra note 288. 
294 Peter Clark & Josephine Chuk, Canada: Expansion of mandatory disclosure rules proposed 

in Budget 2021, GLOBAL COMPLIANCE NEWS (June 11, 2021). 



2022] MANDATORY DISCLOSURE RULES 163 
 

 

MDRs. This standard could draw upon DAC 6, CRS MDRs, and the MDRs of 

various countries.295  

 

CONCLUSION 

 

MDRs have developed from domestic measures with a narrow scope into 

prominent tools in the international fight against tax avoidance and evasion. With 

more countries adopting MDRs each year, it appears that their expansion and 

development are likely to continue. Certain MDRs, such as the CRS MDRs, may 

become widely adopted international standards. In the next few years, policymakers 

in different countries may consider, either voluntarily or under international 

pressure, to adopt MDRs or amend their existing MDRs. Understanding the 

development of MDRs and the underlying trends can contribute to policy 

discussions on whether to adopt MDRs or expand existing MDRs.  

This Article contributes to the literature by exploring the development of 

MDRs over time with a cross-jurisdictional lens, exposing trends in the evolution 

of MDRs, and examining how the expansion and internationalization of MDRs 

have affected what needs to be reported, who needs to report, and how information 

is exchanged between jurisdictions. This Article shows how the trends in the 

evolution of MDRs fit into broader movements in international tax policy: an 

enhancement of efforts to curb tax avoidance and evasion, a focus on tax avoidance 

enablers, and international multilateralism and cooperation on tax matters. As these 

trends continue, we expect to see a further expansion and internationalization of 

MDRs. 

 

 
295 It could also build on the recommendations of Action 12, although these are somewhat 

outdated after the developments of the past six years. 


	Introduction
	I. First generation: 1980s
	A. United States
	B. Canada

	II. Second Generation: 2000s and Early 2010s
	A. United States
	B. United Kingdom
	C. Other Countries

	III. Third Generation: 2015-Present
	A. DAC 6
	B. CRS MDRs
	C. Other Countries

	IV. Trends in the Development of MDRs
	A. Expansion of What Should Be Reported
	B. Expansion of Who Should Report
	C. Internationalization of MDRs

	V. The Path Ahead for MDRs
	Conclusion