Thursday, April 23, 2009

G 20 Support for Tax Haven List


With the impact of the credit crunch, and recent G20 discussions in London, there has been significant debate about how to crack down on tax havens and prevent tax evasion.

The Organisation for Economic Co-operation and Development (OECD) has called for greater openness and transparency, asking financial centres around the world to adhere to an internationally agreed standard on the exchange of information for tax purposes.

As a result, and following the summit, the OECD released an updated list of jurisdictions that

Comply with the international standard on the exchange of tax information or
Have committed to do so or
Have yet to commit

The threat of 'black listing' these jurisdictions makes them less attractive to investors as they will not benefit from tax treaties and other financial incentives.

The OECD’s internationally agreed standard requires the exchange of information on all tax matters for the administration and enforcement of domestic tax law. Their aim is to achieve a rapid and effective implementation of an international standard but this will however take some time to implement as legislative changes and the negotiation of specific bilateral agreements are required. They also intend to speed up the negotiations of tax information exchange agreements (TIEAs)

For those who use jurisdictions that meet or exceed all of the relevant international financial standards there will be no further consequences. Client confidentiality, regulation and compliance remain intact and ‘fishing expeditions’ and blanket requests for data from a particular country are not permitted. Even under a TIEA, one country cannot simply demand information from another and there is no automatic exchange of information. Instead however strict criteria must be met, including reasons for believing that information is relevant to tax administration, enforcement or evasion, and a statement that the requesting country has pursued all means available in their own territory to obtain the information.

Whilst the G20 has pushed the issue of information exchange into the limelight, here is still much discussion on whether those jurisdictions that have not yet complied with the standard stipulated by OECD should be black listed or deemed as ‘tax havens’.

Concern has been expressed that the list of jurisdictions under scrutiny fails to separate those offshore centres operating with widely accepted international standards and tax agreements, from other ‘rogue’ jurisdictions.

It has also been pointed out that the OECD list is not a black list. It is simply a progress or status report of those jurisdictions that have taken steps to adopt the agreed international tax standard. It is ironic that many of the jurisdictions not on the ‘white list’ have a number of tax treaties and information exchange agreements in place.

For more information go to www.oecd.org

Bruce Lyle
Membership Services Manager

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