Furthering efforts to fight against international tax evasion and bank secrecy, members of the Global Forum on Transparency and Exchange of Information for Tax Purposes have issued 12 new peer review reports.
Reports on Andorra, Anguilla, Antigua and Barbuda, Austria, Bahrain, the Virgin Islands (British), Curaçao, Liechtenstein, Luxembourg, Saint Kitts and Nevis and the Turks and Caicos Islands focus on their legal frameworks which allow for transparency and exchange of tax information. The review of the United Kingdom also considers the exchange of information in practice.
In addition, two supplementary reports - for Belgium and the Cayman Islands - show that they are swiftly amending their domestic legislation to address recommendations made by the Global Forum in previous reviews. More details on all the reports are provided below.
The reports describe each jurisdiction’s rules for ensuring that information is available to the tax authorities, how it can be accessed by authorities and the mechanisms in place to exchange information with foreign tax authorities. They also identify deficiencies and make recommendations on how to improve co-operation in international tax matters.
In all 12 new reviews, the most common deficiencies relate to: the lack of available ownership information as regards trusts and bearer shares; incomplete accounting information for some forms of trusts and partnerships, including foreign or international entities; and some limitations in the international agreements allowing for exchange of information.
Jurisdictions follow up on Global Forum recommendations
The supplementary reviews, part of the Global Forum’s new follow-up procedures, show that Belgium’s compliance with the international standards improved significantly when it introduced new legislation lifting bank secrecy related to international tax matters. And the Cayman Islands demonstrated its commitment to implementing the international standards for transparency and exchange of information by amending account keeping requirements in relation to companies, partnerships, exempted limited partnerships, and trusts. The Phase 2 reviews of Belgium and the Cayman Islands, assessing their exchange of information in practice, will take place during the second half of 2012.
After reporting changes in their domestic legislation, five jurisdictions (Barbados, the Virgin Islands (British), Mauritius, Panama, San Marino and the Turks and Caicos Islands) will undergo supplementary reviews. The Global Forum is also monitoring those jurisdictions which have not provided feedback on actions they are taking.
“The Global Forum’s peer reviews have produced real change. Global Forum member jurisdictions are implementing the international standard, signing hundreds of agreements and negotiating many others. Over recent years numerous countries have adapted their legislation to ensure the effective exchange of information . This will improve tax compliance, benefitting all countries. While progress is still required in a number of jurisdictions, for some the speed of change, prompted by the peer reviews, is such that supplementary reviews are already being triggered in order for new progress to be recognized”, said the Chair of the Global Forum, Mike Rawstron of Australia.
An additional 12 peer review reports and 5 supplementary reports are set to be completed by November 2011 bringing the number of reviews to about 60 before the G20 Summit to be held in Cannes.
THE PEER REVIEW REPORTS AT A GLANCE
Report on the legal framework and on its application (Phase 1 and 2)
United Kingdom: The United Kingdom has one of the world's largest networks of international exchange of information instruments and exchanges a large volume of information every year. It has a good legal and regulatory framework for EOI, though insufficient mechanisms are in place to identify owners of bearer shares and there is a restrictive condition to its statutory information gathering powers. Further, the report for this combined review recommends improvements to ensure more timely responses to information requests. See EOI Portal page for the United Kingdom: http://www.eoi-tax.org/jurisdictions/GB
Reports on the legal framework (Phase 1)
Andorra: The peer review of Andorra identifies some deficiencies in its legal framework for the exchange of information and recommends improvements to enforcement and notification provisions as well as provisions regarding availability of ownership information concerning foreign trusts which have Andorran trustees and the few remaining bearer shares. Complete accounting records are also not ensured for foreign trusts which have Andorran trustees. Andorra’s Phase 2 review is scheduled for the second half of 2013. See EOI Portal page for Andorra: http://www.eoi-tax.org/jurisdictions/AD.
Anguilla: Anguilla has quickly built a network of 17 tax information exchange agreements and its authorities have broad powers to access information pursuant to these agreements. Anguilla has clear requirements for companies, partnerships and foundations to maintain ownership and identity information. However, it is not clear that this information is available for limited liability companies (LLCs) or in all cases for trusts. In addition, Anguilla’s accounting requirements are not in line with the international standard. Anguilla’s Phase 2 Review is scheduled for the second half of 2013. See EOI Portal page for Anguilla: http://www.eoi-tax.org/jurisdictions/AI.
Antigua and Barbuda: The peer review of Antigua and Barbuda identified important deficiencies relating to international entities that may be formed under Antigua and Barbuda law. For these legal entities, reliable accounting information is not available and the authorities’ power to obtain information to respond to international requests for information are limited by confidentiality provisions. As such, Antigua and Barbuda has not been assessed as ready to move to the next phase of its evaluation. Antigua and Barbuda’s position will be reviewed in six months. See EOI Portal page for Antigua and Barbuda: http://www.eoi-tax.org/jurisdictions/AG.
Austria: Austria has made progress in developing a network of international agreements and has new legislation allowing access to bank information to assist international partners and has an extensive network of information exchange agreements. Its legal framework usually ensures the availability of relevant information, though some amendments are needed with respect to ownership information related to bearer shares and foreign companies incorporated outside the EU. The authorities can access bank information on behalf of some but not all international partners and the scope of professional privilege may hinder the full exchange of information. The phase 2 review of Austria is scheduled for the second half of 2012. See EOI portal page for Austria: http://eoi-tax.org/jurisdictions/AT
Bahrain: The legal and regulatory framework for the exchange of information is essentially in place in Bahrain, though some areas are in need of improvement. The report identifies deficiencies and makes recommendations relating to the uncertainty of the obligation for financial trusts to keep documents related to accounting records, confidentiality rules related to financial trusts, some uncertainty related to the power to access information and the requirement in all cases to gain consent of taxpayers before providing information to foreign authorities. Bahrain has signed exchange of information agreements with 26 jurisdictions that meet the standards. The Phase 2 Peer Review of Bahrain is scheduled for the first half of 2013. See EOI Portal page for Bahrain: http://eoi-tax.org/jurisdictions/BH
Virgin Islands (British): The Virgin Islands has made progress in improving its legal and regulatory framework in order to be able to effectively exchange tax information. The availability of information on trusts and the availability of reliable accounting records is not yet ensured however. Also, the authorities do not have sufficient powers to obtain all foreseeably relevant information in order to respond to international requests. The Virgin Islands has not been assessed as ready to move to the next phase of its evaluation. The Virgin Islands’ position will be reviewed in six months. See EOI Portal page for the Virgin Islands: http://www.eoi-tax.org/jurisdictions/VG.
Curaçao: The legal and regulatory framework for the exchange of information is in place in Curaçao, but some areas need improvement. The availability of information on limited partnerships, foundations and foreign companies is not ensured, and the appeal rights and prior notification requirements for taxpayers are not compatible with the effective exchange of information. The report also recommends that Curaçao brings the exchange of information agreements that have been signed over the past 2 years into force quickly. Curaçao’s Phase 2 review is scheduled for the second half of 2014. See EOI Portal page for Curaçao: http://www.eoi-tax.org/jurisdictions/CW.
Liechtenstein: Liechtenstein has made rapid progress in developing exchange of information mechanisms since March 2009. Its competent authority has powers to obtain all relevant information, including from banks. It has a network of agreements supporting international exchange of information, though some action to strengthen this is recommended. The peer review identified gaps concerning availability of ownership and accounting information. Provided Liechtenstein takes the necessary measures to address these deficiencies, its Phase 2 review will proceed in the second half of 2012. See EOI Portal page for Liechtenstein: http://www.eoi-tax.org/jurisdictions/LI.
Luxembourg: Luxembourg has negotiated a number of EOI agreements to the standard in the last two years and can access information held by Luxembourg banks in order to respond to requests from foreign authorities. As regards the availability of information, the legal framework does not ensure that ownership information relating to companies is available in all circumstances. The legislation ensuring the availability of bank information should also be strengthened. The phase 2 review of Luxembourg is scheduled for the second half of 2012. See EOI portal page for Austria: http://eoi-tax.org/jurisdictions/LU
Saint Kitts and Nevis: The St. Kitts and Nevis legal and regulatory framework is largely in place to ensure availability of reliable ownership, accounting and bank information, access to this by authorities and exchange with foreign partners under an expanding network of multilateral and bilateral agreements. One significant issue was identified – a lack of consistent and binding requirements to ensure the availability of accounting information for general partnerships that carry on business therein. The Phase 2 review of St. Kitts and Nevis is scheduled for the second half of 2013. See EOI Portal page for Saint Kitts and Nevis: http://www.eoi-tax.org/jurisdictions/KN
Turks and Caicos Islands: The Turks and Caicos Islands has made progress in improving its legal and regulatory framework in order to be able to effectively exchange tax information. There are deficiencies in the domestic laws with regard to the availability of reliable accounting information and the authorities’ powers to obtain all foreseeably relevant information for exchange of information purposes. Some gaps also exist in the availability of some ownership information. As such, the Turks and Caicos Islands has not been assessed as being ready to move to the next phase of its evaluation. The Turks and Caicos Islands’ position will be reviewed in six months. See EOI Portal page for the Turks and Caicos Islands: http://www.eoi-tax.org/jurisdictions/TC
Supplementary reports
Belgium: To answer the deficiencies identified in its 2010 review, in April 2011 Belgium a new law granting an access to bank information to all its treaty partners upon condition of reciprocity. The supplementary report of Belgium notes that thanks to this new law, exchange of information to the standard can now take place with more than 80 of Belgium's partners, remedying the main concern expressed in the phase 1 report of Belgium. Thanks to these new developments, the phase 2 review of Belgium will now take place during the second half of 2012. See EOI portal for Belgium: http://www.eoi-tax.org/jurisdictions/BE
Cayman Islands: The Cayman Islands has moved quickly to address the shortcomings identified in its 2010 review in respect of the availability of accounting records. In addition, the supplementary report recognises the 5 new tax information exchange agreements signed by the Cayman Islands, and removes the concern originally raised with respect to nominees and the availability of ownership information. Some other recommendations concerning the availability of ownership and identity information remain and these will be considered in the phase 2 review of the Cayman Islands, to take place in the second half of 2012. See EOI Portal page for the Cayman Islands: http://eoi-tax.org/jurisdictions/KY
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