Exchange of Information in Tax Matters:

Experiences from Croatia and Slovenia

Irena Klemenčić*3
Maja Klun**4
UDK: 336.227(497.4:497.5)
336.228.3(497.4:497.5)
35.071.5:341.24(497.4:497.5)
3.071.5:341.24(497.4:497.5)
351.88(497.4:497.5)
https://doi.org/10.31297/hkju.22.4.5
Review article / pregledni znanstveni rad
Received / primljeno: 2. 1. 2022.
Accepted / prihvaćeno: 3. 6. 2022.

Following developments in the field of global administra-

tive cooperation, which started in 2009 and resulted in the CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
acceptance of automatic exchange of information as the
global standard of tax transparency, this paper examines
the first results of the implementation thereof. Building
on the corpus of published analyses and research of the
development of the latest global standard, the authors exa-
mine the available data on implementation of exchange of
information in Croatia and Slovenia. The two EU member

*
Irena Klemenčić, Assistant at the Faculty of Law, University of Zagreb, Croatia
(asistentica na Pravnom fakultetu Sveučilišta u Zagrebu, email: [email protected]).
ORCID: https://orcid.org/0000-0003-3804-946X
**
Maja Klun, Professor at the Faculty of Public Administration, University of Lju-
bljana, Slovenia (profesorica na Fakultetu javne uprave, Sveučilišta u Ljubljani, Slovenija,
email: [email protected]).
ORCID: https://orcid.org/000-0002-1025-9134
 Klemenčić, I. & Klun, M. (2022). Exchange of Information in Tax Matters...
HKJU-CCPA, 22(4), 605–632
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states of similar background and governed by the same EU

framework on administrative cooperation take a different
tax policy approach to addressing the issues of tax tran-
sparency and fighting tax evasion. The paper results in re-
commendations stressing the importance and benefits of
higher tax transparency.
Keywords: exchange of information, tax transparency, tax
evasion, Croatia, Slovenia

1. Introduction1
Over the years, exchange of information has undergone a transformation
from an ancillary instrument, aimed at assisting the implementation of tax
treaty provisions, to a globally accepted tax procedure used to fight tax
evasion. The development of this instrument at an international level over
the past decade has been unprecedented. In the 1990s, exchange of infor-
mation was hardly perceived by the tax law community as an instrument
of international significance and only a few authors mentioned it in the
context of confronting tax havens and aggressive tax planning, as coun-
tries with a strong bank secrecy tradition firmly protected their positions.
However, following the “big bang” of 20092 and the declaration that the
era of bank secrecy had come to an end (G20, 2009), the situation star-
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

ted to change rapidly. Exchange of information plays an important role

in providing countries with information on their residents’ income and
property earned and held in other countries. Currently, there are many
opportunities for international exchange of tax information, depending
on the countries involved and the tax information exchanged. This paper
will focus on the most commonly used instruments in Croatia and Slove-
nia, particularly with regard to the latest global standard of (automatic)

1
This paper is an outcome of the bilateral project Development of transparency in tax
procedures and data in the EU, Slovenia and Croatia (BI-SI-HR/20-21-010), which is (co)
financed under the Slovenian Research Agency and the Croatian Ministry of Science and
Education.
2
White, grey, and black lists of countries were introduced, in accordance with their
commitment to the implementation of a tax treaty network, as well as the “rule of 12 tax
treaties” necessary for a country to be included on a white list. On 13 March 2009, Aus-
tria, Belgium, Luxembourg, and Switzerland announced that they would include the current
standard of Art. 26 of the OECD Model in their tax treaties (Oberson, 2018, p.8).
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exchange of information – Art. 26 of the OECD Model, Foreign Account

Tax Compliance Act (FATCA) and the Directive on Administrative Coo-
peration (DAC), as well as exchange of information on VAT.
The purpose of this paper is not to thoroughly analyse the instruments of
exchange of information, but to provide an insight into the functioning of
exchange of information, to the extent of available information. Hence,
after brief introductory remarks on each instrument, the paper provides
data on applying exchange of information procedures and an evaluation
of the instrument conducted by various stakeholders. In writing this pa-
per, the authors used a normative analysis of the relevant legal sources
on exchange of information. The normative analysis is accompanied by
a historical and comparative approach. In examining the effects of im-
plementing exchange of information, the selected national data on the
executed exchanges is analysed quantitatively.
Following the introductory remarks, the paper starts with a historic and
normative overview of the development of exchange of information by the
OECD, starting with Art. 26 of the OECD Model Tax Convention, which
subsequently led, under the influence of many factors, to the introduction
of the Common Reporting Standard (hereafter referred to as CRS). The
third chapter of the paper describes the FATCA legislation, followed by
a chapter on EU legislation on exchange of information. The fifth chap-
ter describes the relevant legislative frameworks of Croatia and Slovenia.
In the sixth chapter, the authors evaluate the available information on
exchange of information in Croatia and Slovenia, providing a comparison
of the two countries. The paper ends with some concluding remarks. CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

2. OECD’s Work on Exchange of Information

In traditional international relations, tax matters between countries have
most frequently been regulated through a network of bilateral tax treaties
based on the OECD Model Tax Convention on Income and on Capi-
tal (OECD, 2017). Although tax treaties have the primary purpose of
preventing double taxation, their role in preventing double non-taxation
is considerable. Therefore, Oberson (2018) emphasizes the dual functi-
on of Art. 26 of the OECD Model – ensuring proper implementation
of the treaty, especially for a country of residence applying a worldwide
taxation system, and helping fight tax evasion and tax avoidance. Art. 26
on exchange of information is a regular component of tax treaties. Cu-
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rrently, the 2014 version of Art. 26 is included in the latest, 2017 version
of the OECD Model (OECD, 2017). Art. 26 of the OECD Model deals
with exchange of information and provides for exchange of information
on request, spontaneous exchange, and automatic exchange – as set out
in point 9 of the commentary on Paragraph 1 of the Art. 26 of the OECD
Model (OECD, 2019b, p. C(26)-9). Although it refers to all forms of
exchange of information, it is primarily directed at exchange of informa-
tion on request. Unlike other tax treaty provisions, the exchange of in-
formation provision is not restricted by the scope of Art. 1 and 2, which
set out the rules on taxes and persons covered by the treaty – it therefore
covers all taxpayers and all taxes (Traversa & Cannas, 2015, p. 150). The
provision relates to the exchange of foreseeably relevant information, pro-
viding the widest possible extent of information and eliminating so-called
“fishing expeditions” (Traversa & Cannas, 2015, p. 150). This means that
a request for information must be thoroughly elaborated and accompani-
ed by relevant information regarding the taxpayer at issue, otherwise the
requested country is not obliged to provide information. The provision
has the purpose of protecting requested countries from vague requests
from requesting countries “taking a leap in the dark” and hoping to find
information on tax evasion by sending vast numbers of requests unsub-
stantiated by evidence.
The second paragraph of Art. 26 deals with the confidentiality of infor-
mation exchanged – it prescribes the obligation to keep the exchanged
information secret, in the same manner as information obtained under
the domestic laws of a contracting state. The paragraph further limits the
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

circle of persons authorised to access and use the information, allowing

the use of information for other purposes upon authorisation by a compe-
tent authority of the supplying state.
The third paragraph of Art. 26 sets out cases in which contracting states
may decline to provide the requested information. The cases relate to
administrative measures opposing the laws and administrative practice of
contracting states, and supplying information not obtainable under the
laws or in the normal course of the administration of contracting states.
Additionally, contracting states may choose not to supply information
which would disclose any trade, business, industrial, commercial, or pro-
fessional secret or trade process, or information whose disclosure would
be contrary to public policy (ordre public). Traversa and Cannas (2015)
explain that the international exchange of information must be carried
out without crossing the lines of usual practice of each state taking part
in the exchange.
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Furthermore, Art. 26 contains Paragraph 4, which prohibits a requested

state from declining to provide information due to a lack of interest in
this information for its own tax purposes. Finally, Paragraph 5 prohibits
contracting parties from declining the exchange of information because
the information is held by a financial institution (i.e. bank), invoking bank
secrecy.
New global circumstances have required a further strengthening of glo-
bally accepted measures to fight tax evasion and have directed the deve-
lopment of the exchange of information standard from request of infor-
mation on demand towards automatic exchange. Art. 26 of the OECD
Model provides for the use of automatic exchange of information; howe-
ver, unlike the other two forms of information exchange, the use of au-
tomatic exchange requires an additional agreement between the con-
tracting parties. The OECD once again recognised the need to launch
a global initiative, which was achieved by publishing the CRS, the latest
globally accepted standard providing for the automatic exchange of in-
formation. The creation of the CRS was encouraged by developments
in the USA, namely by the adoption of the Foreign Account Tax Com-
pliance Act (FATCA) legislation; however, the two instruments differ to
some extent.3 In the EU, the provisions of the CRS have been included in
the Directive on Administrative Cooperation (DAC) and its subsequent
amendments.
The CRS was the OECD’s response to FATCA regulations on the auto-
matic exchange of information, endorsed by G5, G8, and G20 countries. CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
Having committed to an automatic exchange of information as the new
global standard, the OECD developed a model consisting of the Model
Competent Authority Agreement (OECD, 2014a) and the CRS, adopted
in 2014 by OECD member states and an additional group of countries,
the so-called “early adopters”. The OECD also published Standard AEOI
(OECD, 2018) (the standard for automatic exchange of financial account
information in tax matters). The intention of the global model is not to
restrict other types of automatic exchange of information, but to deter-
mine a minimum standard. Although the starting point for the CRS was
FATCA (see further on in the text), the CRS differs in its multilateral
approach, corrections of the US system of taxing citizens, and omitting
the punitive withholding tax. The EU implemented the CRS by modifying

3
For a more detailed analysis see: Gadžo & Klemenčić (2017).
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the DAC (see further on in the text). The first information was exchanged
automatically in 2017 (Oberson, 2018, p. 194).
Tax treaties containing Art. 26 may serve as legal basis for the automatic
exchange of information. Another practical option, recommended by the
OECD (2014b, p.13), is to use the Multilateral Convention (see further
on in the text). Either solution must be accompanied by the Competent
Authority Agreement (CAA).
The CRS requires an active role of financial institutions, which must con-
duct due diligence procedures and apply reporting rules in order to iden-
tify and report to their national revenue authorities. The information rela-
tes to reportable accounts (including interest, dividends, account balance
or value, income from insurance products, sale proceeds from financial
assets, and other income. Reportable accounts are accounts held by indi-
viduals and entities (with the obligation to look through passive entities)
(Oberson, 2018, p. 198).

3. FATCA
FATCA regulations are a direct consequence of many cases of tax evasion
by US citizens related to banks located in countries with a high level of
banking secrecy, i.e. tax havens, as well as the economic downturn of 2008
(see Gadžo & Klemenčić, 2017 for a more comprehensive overview of the
circumstances leading to the adoption of FATCA). High revenue losses
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

and budget deficits were the incentive behind some previous attempts at
fighting offshore tax evasion; however, FATCA brought about a brand
new approach to tackling those issues.
The purpose of FATCA is to ensure annual reporting on the value of
assets and income of US direct and indirect owners of foreign financial
accounts (Tello, 2014, p. 91). FATCA is US domestic legislation that
prescribes the obligation of foreign financial institutions to report tax in-
formation about their US clients to the IRS. As domestic legislation it is
not applicable outside the US; therefore, the US has developed a special
international agreement, the Intergovernmental Agreement (IGA), which
serves as an instrument for the international implementation of FATCA
and provides a new international standard on automatic exchange of in-
formation (Parada, 2015). To implement FATCA, two IGA models have
been developed, each with sub-versions and a different scope. Model 1
IGA, also used as a template for OECD’s CRS, provides for reciprocal
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obligations of the contracting country. Model 2 IGA has a more limited

scope and represents a legal framework for providing the IRS with in-
formation on US taxpayers by financial institutions (Somare & Wöhrer,
2014, p. 396).
Another important issue for the implementation of FATCA is the legal
basis – there should be a treaty or a bilateral agreement in force regarding
exchange of information between the contracting countries. As many co-
untries did not have an appropriate agreement with the US in force, the
OECD’s and Council of Europe’s 1988 Multilateral Convention on Mu-
tual Administrative Assistance in Tax Matters4 was chosen. It contains a
more thorough set of rules on exchange of information than tax treaties,
as its main purpose is to regulate the exchange of information between
countries.
In its aim of improving tax compliance, FATCA legislation does not in-
volve obligations for individual US taxpayers, but imposes rather burden-
some obligations on financial institutions (banks, securities brokers, and
the like). They are required to conduct due diligence procedures and re-
port information on account holders to their national tax authorities or
directly to the IRS, depending on the IGA model chosen by the contrac-
ting state. The functioning of the system is enforced by a punitive 30%
withholding tax charged on payments from US-source income to be paid
by non-US financial institutions which do not comply with the FATCA
requirements. The same obligation exists for non-financial non-US en-
tities receiving payments from a US source, which also have to provide CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
information about US owners to the IRS (Eckl & Sambur, 2012, p. 37).

4. EU Legislation
4.1. Exchange of Information on Direct Taxes

The European Union started its work on harmonising the area of admi-
nistrative cooperation in the 1970s, with the adoption of a Directive on
mutual assistance in direct tax matters in 1977. The work on expanding
the scope of application of exchange of information continued with the

4
More about the Convention at: https://www.oecd.org/tax/exchange-of-tax-informa-
tion/convention-on-mutual-administrative-assistance-in-tax-matters.htm.
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adoption of the Savings Directive5 in 2003, which provided for an auto-

matic exchange of information on income from savings in other member
states. Its relatively narrow scope related to natural persons.
As these efforts proved not to provide a sufficient legal basis for the ra-
pid development of exchange of information globally, a new Directive on
administrative cooperation in tax matters (DAC) was adopted in 2011,
repealing previous Directives and expanding the scope of exchange of
information. The DAC and its amendments closely follow the latest glo-
bal initiatives in international taxation, particularly automatic exchange of
information. Therefore, it includes the elements of the BEPS initiative, as
well as the OECD’s CRS (Oberson, 2018, p. 87).
DAC deals with exchange of information on direct taxation and it corres-
ponds to the provisions of the CRS, i.e., the global standard for exchange
of information. It encompasses assistance in assessment and enforcement
of “all taxes of any kind levied by, or on behalf of, a Member State or the
Member State’s territorial or administrative subdivisions, including the
local authorities” (Art. 2). Furthermore, the “Directive shall not apply to
value added tax and customs duties, or to excise duties covered by other
Union legislation on administrative cooperation between Member Sta-
tes… ( … ) shall also not apply to compulsory social security contributions
payable to the Member State or a subdivision of the Member State or to
social security institutions established under public law.” Fees and dues of
contractual nature are also excluded from the scope of DAC.
In the chapter on exchange of information, DAC sets out rules on exchan-
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

ge of information on request, mandatory automatic exchange of informa-

tion, and spontaneous exchange of information. Further chapters include
rules on other forms of administrative cooperation (presence in admini-
strative offices and participation in administrative enquiries, simultaneous
controls, administrative notification, feedback, and sharing of best prac-
tices and experience).
DAC does not stop at exchange of information on direct taxes in its
efforts to ensure fiscal transparency. After the first amendment on auto-
matic exchange of information (DAC 2), subsequent amendments rela-
te to automatic exchange of tax rulings and advance pricing agreements
(DAC 3), automatic exchange of country-by-country reports (DAC 4),
access to beneficial ownership information collected pursuant to anti-mo-

5
Council Directive 2003/48/EC on taxation of savings income in the form of interest
payments
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ney-laundering legislation (DAC 5), and automatic exchange of reporta-

ble cross-border arrangements (DAC 6). Currently, the EU is working on
introducing tax transparency rules for reporting by digital platforms on
their sellers (DAC7).

4.2. Exchange of Information on Indirect Taxes

Even though, globally, exchange of information in tax matters as a tool

of fiscal transparency is related mostly to direct taxes, there is a similar
procedure for indirect taxes, namely VAT. The exchange of informati-
on on VAT is prescribed by Council Regulation (EU) No 904/2010 of 7
October 2010 on administrative cooperation and combating fraud in the
field of value added tax. The Regulation introduces effective measures
against cross-border fraud and the collection of VAT where the place of
taxation is different from place of establishment of the supplier. It also
sets out conditions for the cooperation of competent authorities in EU
member states with each other and with the Commission to comply with
VAT laws. It facilitates the following: exchange of information on request,
exchange of information without prior request (spontaneous and automa-
tic), feedback, storage, request for administrative notification, presence in
administrative offices, simultaneous control, provision of information to
taxable persons, and Eurofisc.

CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

5. Legislative Frameworks in Croatia and Slovenia
5.1. Legislative Framework in Croatia

Croatia is active in supporting international efforts at tackling tax eva-

sion and was one of the “early adopters” of tax transparency initiatives
regarding automatic exchange of information. The analysis of the imple-
mentation of exchange of information starts with the most common and
oldest instrument: tax treaties. In September 2021, Croatia was party to
66 treaties6 and all of these contain an exchange of information clause, ba-
sed on the corresponding version of the OECD Model which was in force

6
An extensive list of treaties between Croatia and its partners is available at the
Croatian Tax Administration website: https://www.porezna-uprava.hr/bi/Stranice/Dvostru-
ko-oporezivanje.aspx)
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at the time each treaty was concluded. In this regard, it can be seen that
three treaties date from before 1991 (when Croatia declared its indepen-
dence) and these contain an older version of Art. 26. The second group
of treaties relates to the period from 1997 to 2015, containing an article
which mostly uses a major exchange of information clause,7 along with a
provision on the secrecy of exchanged information. The third group of tax
treaties contains treaties concluded based on the amended Art. 26 of the
OECD Model. These treaties use the standard of foreseeable relevance of
the information to be exchanged. Secrecy provisions are also included, as
well as situations in which a party is not obliged to exchange information
or may decline the exchange. The latest treaties that entered into force in
2020, signed between Croatia and Japan, Kazakhstan, and Vietnam, con-
tain the latest version of Art. 26 of the 2014/2017 OECD Model.
The Multilateral Convention on Mutual Administrative Assistance in Tax
Matters, a multilateral instrument developed by the OECD and the Co-
uncil of Europe for the purpose of exchange of information, has been
open for signatures since 1988 and entered into force in 1995. However,
Croatia only signed the Convention in 2013, when its provisions were nee-
ded to serve as legal basis for the implementation of FATCA and OECD/
DAC automatic exchange of information instruments. This is particularly
important because Croatia did not have a tax treaty in force with the US,
so the Multilateral Convention served as legal basis for conducting auto-
matic exchange of information. Most of the banks operating in Croatia
have foreign owners and are parts of international groups doing busine-
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

ss in the US, so the implementation of FATCA was unavoidable. The

IGA between Croatia and the US was signed in March 2015 (reciprocal
IGA Model 1A) and entered into force in December 2016, while the first
exchange of information took place on 30 June 2017. In accordance with
the agreement, Croatian banks must provide information on US citizens’
bank accounts to the Croatian tax authorities, who then send the infor-
mation periodically to the IRS. In return, US authorities have a reciprocal
obligation and must supply Croatian tax authorities with information on
Croatian citizens’ bank accounts in the US.
As has already been noted, the EU has played an active role in all inter-
national initiatives directed at improving fiscal transparency. Apart from

7
A major exchange of information clause relates to an exchange of information
which exceeds the purpose of applying a tax treaty. A minor exchange of information clause,
on the other hand, only allows exchange of information for the purpose of implementing a
tax treaty.
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the early efforts, the EU included the provisions of the CRS in the DAC
Directive, thus enabling its member states to implement CRS contents
in their national legislations with the highest level of harmonisation. In
Croatia, the provisions of the DAC Directive and all its amendments have
been transposed in the form of a separate piece of legislation: The Act on
Administrative Cooperation in Tax Matters.
The provisions on administrative cooperation were previously part of the
General Tax Act, i.e. the act that prescribes the rules for tax procedure.
With the adoption of FATCA and the increase of DAC provisions, the
legislator decided to include all the international exchange of informati-
on provisions within a single act. The jurisdiction for the implementation
of administrative cooperation was entrusted to the Ministry of Finance,
Tax and Customs Administration. The act applies to all taxes of any kind
prescribed by member states (with certain exceptions regarding VAT, cu-
stoms, excise duties, and social security contributions). It sets out the
rules for administrative cooperation in the field of taxation between the
Republic of Croatia and EU member states, automatic exchange of infor-
mation on financial accounts between the Republic of Croatia and other
jurisdictions, automatic exchange of information on country-by-country
reporting between the Republic of Croatia and non-EU jurisdictions, and
the implementation of the FATCA agreement between the Republic of
Croatia and the USA.

5.2. Legislative Framework in Slovenia CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

Slovenia has been an EU member state since 2004 and as such has au-
tomatically followed the regulations adopted by the European Commi-
ssion. Therefore, all Directives (AEOI DAC 1-4) and other regulations
connected with exchange of information have been included in Slove-
nian legislation, mostly as part of the Tax Procedure Act (ZDavP-2) of
2006 with changes. Apart from EU Directives, other legislative backgro-
und for exchange of information adopted in Slovenia is connected to the
OECD Convention on Mutual Administrative Assistance in Tax Matters,
CRS MCAA (Multilateral Competent Authority Agreement) and CbCR
(country-by-country reporting), bilateral agreements on avoiding double
taxation, FATCA, and the Decision on the approval of the Memorandum
of Understanding between the Financial Administration of the Republic
of Slovenia and the Netherlands Tax Administration regarding exchange
of information in direct tax matters of 2021.
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According to the annual report of the Slovenian Tax Administration, due

to the CRS and DAC2 Slovenia automatically exchanged information
with 106 jurisdictions in 2020, while according to the OECD report, it
exchanged information with 78 partners in 2021 (OECD, 2021b, p. 33).
Slovenia had signed 59 bilateral agreements on avoiding double taxation
until 2021. Most of these had been prepared according to the OECD
Model, as explained previously.

6. Evaluation of Exchange of Information

6.1. Evaluation of Exchange of Information Generally

The topic of exchange of information has been very fruitful in terms of

academic papers, which have mostly focused on the effects of automatic
exchange of tax information. Research shows that the behaviour of tax
evaders has changed over the last several years. According to research by
De Simone, Lester and Markle (2020), FATCA decreased equity foreign
portfolio investment among US individuals. Ahrens and Bothner (2020)
estimated that household assets in tax havens have declined by 67% and
have increased in non-havens. Similar findings can also be seen in other
academic papers (i.e., Ahrens, Hakelberg & Rixen, 2020) but some of
these also emphasize that “sophisticated” tax evaders are finding new
ways of avoiding regulations (i.e., Lips, 2019; van Brederode, 2019; Juel
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

Andersen, Johannesen & Rijkers, 2020). Therefore, the effectiveness and

evaluation of automatic exchange have raised several new issues and rese-
arch over the last few years to find reasons and opportunities to improve
the effects of automatic exchange of information (Baker & Murphy, 2021;
Janský & Prats, 2015, Meinzer, 2019). An interesting analysis by Noked
(2018) addresses FATCA and CRS non-compliance opportunities which
arise from classifying private entities as financial institutions, unlikely
to report its owners to tax authorities, and not falling under banks’ and
other financial institutions’ obligations to report their beneficial owners.
Another piece of research included a series of interviews with government
officials in eight countries on collecting and using information, as well as
the strengths and weaknesses of automatic exchange of information. The
findings warn of the limited scope of information submitted to partner
countries (especially by the US) and cases of declining to take part in
information exchange due to inadequate data protection by the contrac-
ting states. A rather limited scope of automatic exchange of information
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obligation, focused only on financial assets and omitting e.g. real estate,
jewels, or art has also been noted as challenging for a successful fight aga-
inst tax evasion (Finér & Tokola, 2017).
An evaluation of automatic exchange of information among EU member
states concluded that in most cases the DAC Directive did not reach the
effectiveness expected, but at the same time it could be evaluated as effi-
cient (European Commission, 2019). The report includes member states’
observations on the impact of DAC and the conclusions are similar to
those of individual pieces of research: increased voluntary disclosure, a
downward trend in offshore hidden wealth, and the ability to fight cross-
border tax fraud and evasion. The evaluation of the functioning of the
internal market or the perceived fairness of the tax system did not gain
enough evidence to be assessed as effective. Another interesting conclu-
sion from the report is the observation that taxpayer awareness of the
Directive is low (European Commission, 2019).
A general evaluation by the European Commission regarding the quality
of AEOI and the use of the data exchanged contains recommendations
intended to improve the quality of information, as some information re-
mained unusable because data was lacking to connect the account infor-
mation with taxpayers. The report also recommends that better use be
made of the data received via AEOI.
The European Court of Auditors (2021, p. 48) produced another report
on the exchange of tax information. The report concludes that the system
for the exchange of tax information has been well established and that a
suitable framework is in place, but more needs to be done in terms of mo- CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
nitoring, ensuring data quality, and using the information received. The
feedback from various countries is that the information exchanged was of
limited quality and was underused. The recommendation is to enhance
the coverage of the EU legislative framework, develop monitoring and gu-
idance, improve the quality and completeness of DAC1 and DAC2 data,
make better use of the information received, and monitor the impact of
information exchange.

6.2. Evaluation of Exchange of Information in Croatia

The Croatian tax authorities have a rather non-transparent approach to

informing the public about the implementation of the key instruments
to enable tax transparency. Although they are obliged by the Right of
Access to Information Act to actively inform the public about their work,
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there are no annual reports on this topic (unlike in other EU member sta-
tes, which publish extensive reports, see the example given for Slovenia)
(FURS, 2021). Even a formal request for general statistical information
on the executed exchanges of information in previous years was only par-
tially complied with.
The first set of available information is shown in Table 1 and relates to
exchange of information on VAT.

Table 1: Exchange of information on VAT in Croatia

Amount of received information Amount of sent information

Year 2017 2018 2019 2020 2017 2018 2019 2020

Exchange on request 348 297 275 252 250 297 434 389

Spontaneous exchange 46 56 37 78 53 34 23 37

Total 394 353 312 330 303 331 457 426

Source: Authors, based on the information obtained from the Croatian Tax Administration
upon formal requests in 2020 and 2021.

The amount of received and sent information is relatively constant; howe-

ver, the amount of sent information is rising, while the amount of received
information is declining. The amount of sent information reached a peak
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

in 2019 and declined afterwards, presumably due to the start of the global
pandemic and its negative influence on economic activity.
Further available information provides the exchange of information based
on FATCA and includes the number of taxpayers and number of accounts
sent to and received from the USA in the period 2014–2019.

Table 2: Exchange of information based on FATCA in Croatia

Year Information Number of taxpayers Number of accounts

2014 Sent to the USA 2,202 4,323

2014 Received from the USA 922 929

2015 Sent to the USA 4,053 8,447

2015 Received from the USA 711 721

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619

2016 Sent to the USA 6,968 14,522

2016 Received from the USA 708 816

2017 Sent to the USA 8,194 16,938

2017 Received from the USA 868 975

2018 Sent to the USA 3,973 8,430

2018 Received from the USA 987 1,131

2019 Sent to the USA 2,268 4,576

2019 Received from the USA 1,239 1,400

Source: Auhors, based on the information obtained from the Croatian Tax administration
upon formal requests in 2020 and 2021.

As shown in Table 2, the number of information exchanges relates to

the number of taxpayers and accounts regarding which information was
exchanged. The numbers rose steadily from 2014 to 2017 and fell signi-
ficantly in 2018 and 2019. Croatia sends a significantly larger amount of
information to the USA than it receives, which leads to the conclusion
that US entities are more active in Croatia, where they keep bank acco-
unts, than Croatian ones in the US.
The data on the implementation of AEOI in Croatia is only available from
the 2019 OECD Report (OECD, 2019c, p. 4). Croatia had 60 partners
to which it sent data for 2017 (in 2018) and 65 partners to which it sent
data for 2018 (in 2019). The 2019 OECD Global Forum Report (OECD, CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
2019a, p. 90) includes some information on exchange of information on
request and spontaneous exchange of information. Croatia received 149
requests during the period under review (2015–2017). Annually, Croatia
generally receives approximately the same number of requests as it sen-
ds, with the same EOI partners (its neighbouring countries and trading
partners):

Table 3: Exchange of information on request and spontaneous exchange of

information in Croatia, 2015–2017

Type of information Number of cases

1. Ownership information 27

2. Accounting information 48
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620

3. Banking information (cases regarding 64 (38 related to natural persons and 26 to

account holders) legal persons)

4. Other type of information 79

Source: Authors, based on information published in OECD (2019a).

Out of these requests, 105 cases were linked to companies, while 113
cases were linked to individuals (some requests entailed more than one
piece of information and/or entity). The information was mostly exchan-
ged with Slovenia, Italy, Germany, Serbia, and Bosnia and Herzegovina
(OECD, 2019a, 91).
Further information relates to exchange of information on request, as re-
ported by the OECD for the period from 2015 to 2017.

Table 4: Exchange of information on request in Croatia, 2015–2017

Year 2015 2016 2017 Total

Total number of requests received 41 54 54 149

Full response 41 54 53 148

Declined 0 0 0 0

Failure to provide information 0 0 1 1

Source: Authors, based on information published in OECD (2019a).

CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

As shown in Table 4, which provides the number of cases for which infor-
mation was requested, there are no significant differences in the number
of exchanges and the numbers are relatively low. In total, 149 requests
were received over a three-year period. Regarding spontaneous exchange
of information during the period from 2015 to 2017, Croatia sent 1,152
pieces of information and received 212. This was information related to
residence, employment, business transactions, banking information, and
tax ruling, and was mostly exchanged with EU member states (OECD,
2019a, p. 80).
In the OECD Global Forum 2020 Report (OECD, 2020, p. 31), Cro-
atia was graded and compared on the implementation of the automatic
exchange of information standard. The OECD observed that the Croati-
an domestic legal framework was in place but needed improvement. The
international legal framework was also found to be in place, but without
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the need for improvement. The overall conclusion was that Croatia nee-
ded to work on improving the implementation of the automatic exchange
of information standard. According to the report, Croatia is effective at
implementing the standard of transparency, but there is insufficient expe-
rience in the implementation of the strengthened standard of beneficial
ownership. The report notes as a positive feature the use of a Personal
Identification Number, which allows competent authorities to access a
wide range of information. The report contains some recommendations,
such as the need to identify the holders of bearer shares and to fully im-
plement the strengthened standard of beneficial ownership. The OECD
Peer Review of the Automatic Exchange of Financial Account Informati-
on 2021 (OECD, 2021a, p. 118) also finds that the Croatian internatio-
nal legal framework for information exchange is in line with requirements,
while “Croatia’s domestic legislative framework requiring Reporting Fi-
nancial Institutions to conduct the due diligence and reporting procedu-
res (CR1) has a deficiency in an area significant to the proper functioning
of an element of the AEOI Standard”. The report finds that “Croatia’s
domestic legislative framework does not impose sanctions on Account
Holders and Controlling Persons for providing a false self-certification”
and makes the recommendation that Croatia should amend its domestic
legislative framework to include sanctions. All other observed issues are
satisfactory and require no further actions to be taken.
According to the OECD Global Forum 2021 Report (OECD, 2021b,
p. 31), Croatia had 75 receiving partners for the 2020 data sent in 2021. CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

6.3. Data on Exchange of Information

in Slovenia

The Slovenian Tax Administration (FURS) provides data on exchange of

information in its annual reports. The published data refer to the amount
of exchanged information according to different regulations, especially in
the field of VAT. In the same chapter, data are provided on cooperation
in tax inspection, use of the Eurofisc network, use of the EUCARIS-VAT
application, and spontaneously exchanged information. The data are pre-
sented for at least three consecutive years, and include countries with
which most of the information is exchanged. According to our findings,
the data are presented in a very transparent way and are easy to obtain.
First, we present the exchange of information in the field of VAT.
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622

Table 5: Exchange of information on VAT in Slovenia

Amount of received information Amount of sent information

Year 2017 2018 2019 2020 2017 2018 2019 2020

Exchange on request 432 385 420 322 393 477 617 448

Spontaneous exchange 62 28 64 55 50 34 47 17

Total 494 413 484 377 443 511 664 465

Source: Authors, based on Finančna uprava Republike Slovenije (2020; 2021; 2022).

As we can see from the table, the amount of received information on VAT
is relatively stable. However, exchange on request for sent information
increased gradually over the years and decreased in 2020, while at the
same time spontaneous exchange decreased. One of the reasons for this
was the situation connected to the COVID–19 pandemic, because tax
administrations announced that delays in exchange of information would
be a consequence of the situation in several countries. In the observed
period, the Slovenian Tax Administration cooperated in two internatio-
nal tax inspections in the field of avoidance of VAT. Within the Eurofisc
network, the Slovenian Tax Administration also checked over 600 suspi-
cious transactions.
Furthermore, the Slovenian Tax Administration automatically exchanges
information in direct taxation as is shown in Table 6.
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

Table 6: Automatic exchange of information on direct taxation in Slovenia in

2019 and 2020

EU Other countries
Information under the legislation
2019 2020 2019 2020

Sent information OECD

Received information OECD 4,871 3,843 2,386 0

Sent information AEOI DAC1 66,775 70,094

Received information AEOI DAC1 74,653 71,961

Sent information AEOI CRS/DAC2 62,837 69,885 10,139 13,951

Received information AEOI CRS/ DAC2 182,955 183,510 6,075 16,326

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Sent information AEOI DAC4 63 41 13 9

Received information AEOI DAC4 468 447 156 132

Sent information FATCA 1,097 1,164

Received information FATCA 1,720 2,063

Total 392,622 399,781 21,586 33,645

Source: Authors, based on Finančna uprava Republike Slovenije (2020; 2021; 2022).

On average, the Slovenian Tax Administration automatically exchanges

over 3,000 pieces of information in the field of direct taxation. Most of
the information is connected to financial accounts which Slovenian resi-
dents have opened abroad, and it is exchanged by neighbouring countries:
Austria, Croatia, and Italy (around 50% for all three countries). Germany
and Cyprus are also important partners: the former because many Slove-
nian residents do business with Germany as the most important business
partner, and the latter mostly because of lower taxation of businesses.
In 2019, as can be observed in the Slovenian Tax Administration report,
most of the financial accounts opened abroad belonged to taxpayers in
the lowest income tax bracket, which shows how important the exchange
of data is (Finančna uprava Republike Slovenije, 2020).
The data exchange under DAC1 in 2020 shows that most of the exchanged
information is connected to pensions (51%), wages (44%), real estate (4%),
and payments to managers and life insurance products (around 1%). In
connection to DAC4, the data of almost 700 companies were exchanged. CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
The Slovenian Tax Administration estimated that as a result of the exchan-
ged information in the period 2015–2019, an additional 13.5 million euros
in taxes were paid. For instance, in 2019, an additional 2.5 million euros in
tax were collected due to exchange of information, because the information
received made it possible to cooperate through tax execution. Cooperation
and exchange of information is therefore an important process.

6.4. Comparison of Information Exchange Data

for Croatia and Slovenia

As regards a comparison between the two countries, there are several fac-
tors which should be taken into account. Firstly, there are no comparable
sources on information exchange data. While Slovenian tax authorities
publish a comprehensive annual report containing data on exchanges,
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624

Croatian data is collected from publicly available sources published by

the OECD and the EU, while only a small segment of the data was made
available by the tax authorities on request. The absence of certain data
for Croatia, however, does not lead to the conclusion that there is poorer
implementation of exchange of information procedures – it only makes
the comparison harder. Additionally, the two countries have undergone
the Global Forum peer review at different times, so the data published by
the OECD are not comparable, because they relate to different periods.
Moreover, the two countries are neighbours and hence important trading
partners, which is proven by the high level of administrative cooperation
between the two countries. And finally, Slovenia started its integration
process into international and subnational organisations (OECD, EU)
much earlier than Croatia, which has resulted in the more advanced im-
plementation of certain procedures in Slovenia as opposed to Croatia.
The comparison of the data on the exchange of VAT information brings
us to the conclusion that Slovenia has had more exchanges overall than
Croatia (see Tables 1 and 5). Slovenian authorities received between 322
and 432 pieces of VAT information upon request, and 28 to 64 pieces
of information annually through spontaneous exchange. The amount of
received information was at its peak in 2017. Croatian tax authorities re-
ceived between 252 and 348 pieces of VAT information annually upon
request, and between 37 and 78 pieces of information through sponta-
neous exchange. The amount of information exchanged on request has
decreased steadily since 2017, while the amount referring to spontaneous
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

exchange grew in 2018, decreased in 2019, and increased again in 2020.

The amount of sent VAT information on request in Slovenia recorded a ste-
ady growth from 2017 to 2019 (from 393 to 617 pieces of sent information)
and then decreased in 2020 to 448 pieces of sent information on request.
In Croatia, the amount of information sent on request is somewhat lower.
It grew from 2017 to 2019 (from 250 to 434) and then fell in 2020 to 389
pieces of sent information. Data on spontaneous exchange of VAT infor-
mation reflects similar results in both countries, with the highest numbers
recorded in 2017. The comparison is presented in Graph 1 below.
Tables 2 and 6 contain data on FATCA exchanges of information. Slove-
nia sent around 1,100 pieces of information in 2019 and 2020. It recei-
ved twice as much information: 1,720 pieces in 2019 and 2,063 in 2020.
The data show a steady growth. The data for Croatia relate to the period
2014–2019. The amount of information sent to the USA is much higher
than the amount of data received from the USA, which indicates a higher
Klemenčić, I. & Klun, M. (2022). Exchange of Information in Tax Matters...
HKJU-CCPA, 22(4), 605–632
625

Graph 1: VAT exchange of information in Slovenia and Croatia, 2017–2020

500

450

400

350 Number of received

information
300
Number of received
250 information
200 Number of received
information
150
Number of received
100 information
50

0
Exchange on Spontaneous Exchange on Spontaneous
request-CRO exchange-CRO request-SI exchange-SI

Source: Authors, based on information obtained by the Croatian Tax Administration upon
requests and published in Finančna uprava Republike Slovenije (2020; 2021; 2022).

level of economic activity of US citizens in Croatia who keep a bank acco-

unt there, than the level of economic activity of Croatian tax residents
in the US. There was a rise in numbers from 2014 to 2017, when infor-
mation on almost 17,000 accounts was sent to the USA. The numbers
decreased afterwards, and amounted to information on 4,576 accounts CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
sent in 2019. As for the information received from the USA, the numbers
are much lower in comparison with Slovenia, and were on the rise in the
observed period, reaching a peak of 1,400 accounts in 2019. The exchan-
ges are performed automatically for a pre-defined list of items, so the
tax administrations only forward the information received from financial
institutions, without influencing the volume of exchange.
Table 6 additionally contains data on Slovenian automatic exchanges of
information based on OECD Model, DAC 1, DAC 2, and DAC 4. As the
table shows, Slovenia is receiving more information than it is sending. The
numbers of automatic exchanges based on CRS/DAC 2 are the highest,
reaching 183,510 pieces of information received and almost 70,000 pieces
of information received from other EU countries in 2020. As Croatian tax
authorities are reluctant to share statistical data on information exchanges,
the only available information from OECD publications relate to on re-
quest and spontaneous exchanges, which are relatively low and only availa-
 Klemenčić, I. & Klun, M. (2022). Exchange of Information in Tax Matters...
HKJU-CCPA, 22(4), 605–632
626

Graph 2: FATCA exchange of information in Croatia and Slovenia, 2019

2.5

1.5

0.5

0
Croatia Slovenia

Sent to the USA Received from the USA

Source: Authors, based on information obtained by the Croatian Tax Administration on

request and published in Finančna uprava Republike Slovenije (2020; 2021; 2022).

ble for the period 2015–2017 (see Tables 3 and 4). Unfortunately, no data
on automatic exchange of information were published or available upon
formal request, so no conclusions can be drawn regarding the quality of
the performed exchanges or the monetary or non-monetary effects thereof.
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

As regards the monetary value of the performed procedures, Slovenian

tax authorities have claimed publicly that the exchange of information has
made it possible for them to collect an additional 2.5 million euros annu-
ally. Unfortunately, as no corresponding information has been published
for Croatia, a comparison of monetary effects is not possible.

7. Conclusion
Both countries evaluated in the research are EU member states and active
members of the international community, which means that they follow
the same regulatory framework and have adopted the same internation-
al conventions and standards. Therefore, their legislative frameworks are
comparable. Because our emphasis is on transparency and a comparison
between the two countries, we can conclude the data for Slovenia are
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627

easily obtained, while for Croatia most data are published in occasional
international reports and some were obtained by means of a special re-
quest directed at the Croatian Tax Administration, but only a few were re-
ceived. Transparency of data on exchange of information can be evaluated
as high or excellent in the case of Slovenia and quite low in the case of
Croatia. This is difficult to understand and explain, because reporting to
international and EU institutions is a regular obligation for EU member
states and information does not need to be collected separately for pub-
lication. However, the conclusion on the quality of performed exchanges
of information is only partial due to the absence of certain information.
A comparison of the data on exchange of information indicates a more
ambitious approach to information exchange by the Slovenian Tax Ad-
ministration, despite a larger population and more companies present
in Croatia. Croatian data show greater information exchange under the
FATCA regime. The Slovenian Tax Administration seems to be more ac-
tive in exchange of information, which is the result of a great effort to
combat tax evasion over the past decade. Transparent data announce-
ment can be of great importance as an indication that information is be-
ing exchanged and that cooperation with several jurisdictions is an active
part of its operation, and can improve tax compliance by taxpayers. Im-
pacts of higher numbers lead us to the conclusion that in Slovenia the
effects are more noticeable, especially in terms of collecting additional tax
revenues. Increased transparency can raise awareness among taxpayers,
which can further influence the effectiveness of information exchange. A
lack of awareness has also been detected by the European Commission; CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
therefore, the Croatian approach to data disclosure may have an impact
on increased transparency.

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Klemenčić, I. & Klun, M. (2022). Exchange of Information in Tax Matters...
HKJU-CCPA, 22(4), 605–632
631

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EXCHANGE OF INFORMATION IN TAX MATTERS:

EXPERIENCES FROM CROATIA AND SLOVENIA

Summary

Globalisation and cross-border movement of persons and capital have placed

new challenges before national tax systems as well as international taxation.
Over the past 20 years there has been an unprecedented development of ex-
change of information, a previously ancillary instrument which has developed
into a widely accepted global means of fighting tax evasion. Exchange of infor-
mation has evolved from an instrument of limited scope used for the implemen-
tation of tax treaty provisions to a sophisticated system of automatic informa-
tion exchange encompassing a vast majority of countries, including infamous
tax havens. The notions of tax secrecy and tax transparency have undergone a
re-evaluation process, resulting in new global paradigms directed at unveiling
previously secret transactions. Banking secrecy has been abolished even in coun-
tries with a strong tradition thereof. As some time has passed since the introduc-
tion of the latest global standard of the automatic exchange of information, this
paper reflects on the most important aspects of exchange of information, regulat-
ed by tax treaties: the OECD’s CRS, EU’s DAC, and FATCA. Following a
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION
theoretical introduction, which provides a historical and comparative overview of
information exchange instruments, the paper presents the practical results of the
implementation. Findings of the evaluation of the instrument conducted by key
international stakeholders are accompanied by available statistical information,
depicting to what extent it has been helpful in preventing tax evasion in Croatia
and Slovenia and in recovering lost public revenues. The paper results in identi-
fying the shortcomings of national applications, based on best global practices
and statistical data as well as providing tax authorities with recommendations
for the improvement of exchanging information. As the system is still in a rather
early stage of implementation, the paper presents the current tax administration
involvement in exchanging information, which will enable further evaluations in
future stages of implementation of the instrument.
Keywords: exchange of information, tax transparency, tax evasion, Croatia,
Slovenia
 Klemenčić, I. & Klun, M. (2022). Exchange of Information in Tax Matters...
HKJU-CCPA, 22(4), 605–632
632

RAZMJENA INFORMACIJA U POREZNIM STVARIMA:

ISKUSTVA IZ HRVATSKE I SLOVENIJE

Sažetak

Globalizacija i prekogranično kretanje osoba i kapitala donijeli su nove izazove

s kojima se nacionalni porezni sustavi kao i međunarodno porezno pravo suo-
čavaju. Tijekom posljednjih 20 godina dogodio se nezapamćen razvoj razmjene
informacija, instrumenta koji je prije imao sporednu ulogu, a potom se razvio u
široko prihvaćeno sredstvo usmjereno na borbu protiv porezne evazije. Razmjena
informacija razvila se od instrumenta ograničenog dosega koji se koristio samo
s ciljem provedbe poreznih ugovora u sofisticirani sustav automatske razmjene
informacija koji primjenjuje većina država, uključujući i ozloglašene porezne
oaze. Pojmovi porezne tajnosti i porezne transparentnosti stoga su poprimili
novo značenje kroz novu paradigmu usmjerenu otkrivanju transakcija koje su
prije bile obavijene velom tajnosti. Bankarska tajnost više nije prepreka razmjeni
informacija čak ni u državama koje su tradicionalno njegovale visoku razinu
tajnosti. Kako je od uvođenja najnovijega globalnog standarda automatske raz-
mjene informacija, uređene poreznim ugovorima, OECD-ovim CRS-om, EU-
ovim DAC direktivama te FATCA-om, proteklo nešto vremena, ovaj se rad
osvrće na najvažnije aspekte razmjene informacija u poreznim stvarima. Nakon
uvodnog dijela koji se fokusira na teorijske postavke, povijesni i komparativni
pregled instrumenata razmjene informacija, u radu se opisuju rezultati praktič-
ne primjene tog instrumenta. Nalazi o evaluaciji instrumenta koje su objavile
vodeće međunarodne organizacije popraćeni su dostupnim statističkim poda-
CROATIAN AND COMPARATIVE PUBLIC ADMINISTRATION

cima koji prikazuju koliko je instrument bio koristan u sprječavanju porezne

evazije u Hrvatskoj i Sloveniji te koliko je javnih prihoda naplaćeno. U radu
autorice identificiraju nedostatke nacionalnih praksi, temeljene na globalnim
najboljim praksama i statističkim podacima. Osim toga, pružaju poreznim vla-
stima preporuke za poboljšanje provedbe razmjene informacija. Sustav je još
nov, stoga rad prikazuje trenutačnu situaciju primjene razmjene informacija,
što će omogućiti daljnju evaluaciju u kasnijim fazama primjene tog instrumenta.
Ključne riječi: razmjena informacija, porezna transparentnost, porezna evazi-
ja, Hrvatska, Slovenija