The work undertaken by the Global Forum ensures that all citizens pay their taxes so that governments have the revenues they need to run their country and supply public services.
This meeting of the Global Forum on Transparency and Exchange of Information for Tax Purposes brought together delegates from 85 jurisdictions and 7 international organisations. They adopted a Progress Report to the G20 based on 59 completed peer reviews; agreed on guidelines for the co-ordination of technical assistance and decided to convene a meeting of countries to focus on the effectiveness of exchange of information.
Opening the Forum, OECD Secretary-General Angel Gurria congratulated the delegates, “At a time of stalled economies and a crisis of politics, your collective tax work is a tangible example of countries moving together in a mutually beneficial direction that will help those trying to extricate themselves from the crisis. Governments have signed more than 700 agreements to exchange tax information. We know that 20 countries have taken advantage of this more transparent environment, putting in compliance initiatives which have already yielded €14 billion in additional revenues from more than 100 000 wealthy tax payers who had hidden assets offshore and that there’s more in the pipeline.” (Please read the opening remarks here).
A year and a half ago, leaders at the Seoul Summit asked the Global Forum to report on the status of the international standard on tax transparency at their Summit in Cannes on 3-4 November 2011. To meet this request, the Global Forum has adopted another 18 reports, bringing to 59 the total number of peer reviews completed: an average of 3 a month. These identify deficiencies, make recommendations on how to address them and, where the deficiencies are sufficiently serious, prevent a jurisdiction from moving on the next stage in the review process. Overall, these reports show that the level of compliance is high and that cooperation has been good. Many of the reports’ 370 recommendations to improve the exchange of information have already been acted upon. A small number of jurisdictions will not pass to the next stage of the review process because the deficiencies were sufficiently serious. Further details can be found in the Progress Report which will be submitted to the G20 and published as part of the Global Forum Annual Report immediately following the G20 Summit.
Members of the Global Forum also adopted and published a new set of 18 peer review reports, including 7 supplementary reports, bringing to 66 the number of reports completed since March 2010.
Reports on Brunei Darussalam, the Former Yugoslav Republic of Macedonia, Gibraltar, Hong Kong (China), Indonesia, Macao (China), Malaysia, Uruguay and Vanuatu focus on their legal frameworks which allow for transparency and international exchange of information. The reviews of Japan, Jersey, the Netherlands and Spain consider in addition these jurisdictions’ exchange of information in practice.
The five supplementary reports – for Mauritius, Monaco, San Marino, the Turks and Caicos Islands, and the Virgin Islands (British) – assess the changes to legislation that these jurisdictions have made 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 address them.
In the 13 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, companies and partnerships (including foreign entities); and limitations in the authorities’ powers to access information requested by foreign authorities.
The supplementary reviews show that jurisdictions’ compliance with the international standards is advancing swiftly. Mauritius, San Marino and the Turks and Caicos Islands introduced new legislation improving their requirements related to accounting information; San Marino, the Turks and Caicos Islands and the Virgin Islands (British) removed limitations by the competent authority to access information; San Marino resolved all its legal deficiencies relating to the availability of ownership information; and Monaco proceeded to expand its network of international agreements and brought 14 existing agreements into force.
The Phase 2 reviews of Monaco, San Marino and the Virgin Islands (British) – assessing their exchange of information in practice – will take place in the second half of 2012, while the Phase 2 review of the Turks and Caicos Islands is scheduled for the first half of 2013.
The Chair of the Peer Review Group, François D’Aubert, commented on the outcomes: “We have seen remarkable progress in the Peer Review Group and a real willingness on the part of jurisdictions to address problems identified by their peers. Of course, there is more work to ensure that in the long term, we achieve a comprehensive and effective exchange of information.”
Membership of the Global Forum continues to expand
The Global Forum welcomed El Salvador, Mauritania, Morocco, and Trinidad and Tobago as new members, increasing the Global Forum to 105 member jurisdictions.
Reaffirming its commitment to ensure that all jurisdictions benefit from the peer review process and from greater tax transparency, the Global Forum adopted guidelines on the best way to conduct technical assistance to ensure that all jurisdictions are in a position to implement and benefit from the standards.
Responding to the call from the G20 Development Working Group, the Global Forum will serve as a platform to facilitate coordination of assistance provided to developing jurisdictions to aid capacity building and to reinforce legal infrastructures necessary for tax transparency and international cooperation. Two pilot projects – with Ghana and Kenya – will lead the way.
Mike Rawstron, Chair of the Global Forum, noted that “we are a club that countries want to join”.
THE PEER REVIEW REPORTS AT A GLANCE
Report on the legal framework and on its application (Phase 1 and 2)
Japan: This combined (Phase 1 and Phase 2) review of Japan found that it has a comprehensive legal and regulatory framework ensuring the availability of ownership, accounting and bank information for all relevant entities and arrangements. Its network of 54 agreements allowing it to exchange information with foreign counterparts, as well as its tax authorities’ powers to access information, ensure effective exchange of information with a large number of jurisdictions. The report recommends that Japan should reduce the time it takes to respond to counterparts’ requests. See EOI Portal page for Japan: http://eoi-tax.org/jurisdictions/JP
Jersey: Jersey’s combined Phase 1 and 2 report recognises the significant progress made by Jersey since 2006, to put in place domestic legislation and a broad network of EOI agreements to allow effective EOI. In addition, Jersey has created internal processes for its competent authority to respond to and make requests. Although some potential impediments have been identified in its domestic access legislation, this framework, whilst fairly new, has been generally effective and expeditious. Jersey has demonstrated an ongoing commitment to continue to work with its EOI partners, and is in the process of considering amendments to address the recommendations made in the report. See the EOI Portal page for Jersey: http://eoi-tax.org/jurisdictions/JE
Netherlands: The Netherlands has an extensive network of agreements allowing for the exchange of information and its tax authorities have powers to access all relevant information. The legal and regulatory framework ensures the availability of bank information and ownership and accounting information for relevant entities, though some small gaps exist with respect to information on owners of bearer shares, partnerships, foundations and foreign trusts. The report recommends that the Netherlands expeditiously ratify its signed agreements and ensure more timely responses to requests. The report also reviewed the legal and regulatory framework of the Caribbean part of the Netherlands. See EOI Portal page for the Netherlands: http://eoi-tax.org/jurisdictions/NL
Spain: Spain has a very comprehensive legal and regulatory framework ensuring the availability of all types of ownership, accounting and bank information, and the Spanish competent authority is already in possession of a large portion of the information that is requested, thanks to its large databases. Spain’s network of exchange of information mechanisms and access powers ensure effective exchange with a large number of jurisdictions, although the negotiation of some mechanisms is lagging behind. See EOI Portal page for Spain: http://eoi-tax.org/jurisdictions/ES
Brunei Darussalam: Brunei is party to a number of bilateral treaties; nonetheless, it is unable to exchange information to the international standard since these agreements currently have restrictions on access to information by Brunei’s tax authorities. In addition, the peer review identified important deficiencies relating to entities that may be formed pursuant to Brunei’s International Financial Centre legislation. Amendments to its legal and regulatory system are therefore necessary in order for Brunei to qualify for the next phase of the evaluation. Brunei has been assessed as not being ready to move to the next phase of its evaluation. Brunei will report back on the steps taken to address the deficiencies identified in the peer review report within 6 months. See EOI Portal page for Brunei Darussalam: http://eoi-tax.org/jurisdictions/BN
The Former Yugoslav Republic of Macedonia: The review of the Former Yugoslav Republic of Macedonia showed that its legal and regulatory framework is largely in place to ensure effective exchange of information. Notably, banking, ownership and accounting information is generally available and there is a good network of bilateral agreements allowing for international information sharing. Improvements to the rights and safeguards that apply to persons in the requested jurisdiction should nevertheless be made so these do not unduly prevent or delay the effective exchange of information in urgent cases. The Phase 2 Peer Review is scheduled for the second half of 2013. See EOI Portal page for the Former Yugoslav Republic of Macedonia: http://eoi-tax.org/jurisdictions/MK
Gibraltar: Gibraltar‘s legal and regulatory framework, providing its tax authorities with access to information and the ability to exchange information with foreign counterparts, is mostly in place. It has also built up a network of 18 agreements allowing for exchange of information with relevant partners. There are however important deficiencies relating to the availability of reliable accounting information for companies, partnerships and trusts. In addition, ownership information may not be available for some professionally managed trusts and where companies have issued bearer shares. Gibraltar will report back on the steps taken to address the deficiencies identified in the report within 6 months. The Phase 2 Peer Review of Gibraltar is scheduled to take place in the first half of 2014. See EOI Portal page for Gibraltar: http://eoi-tax.org/jurisdictions/GI
Hong Kong, China: The legal and regulatory framework for the exchange of information is in place in Hong Kong, China but there are some gaps in the availability of ownership and accounting information. The report indicates that Hong Kong, China’s competent authority should have the power to obtain all relevant information for all of its foreign counterparts and regardless of whether Hong Kong, China needs the information for its own tax purposes. The report also recommends improvements in the EOI network to ensure agreements to the standard are in place with all relevant partners. Hong Kong’s Phase 2 review is scheduled for the second half of 2012. See EOI Portal page for Hong Kong, China: http://eoi-tax.org/jurisdictions/HK
Indonesia: Indonesia has an extensive network of international exchange of information agreements. It has a good legal and regulatory framework for EOI, though there is a restrictive condition to its statutory information gathering powers. Recommendations are also included in respect of enforcement provisions and accounting records for foreign trusts which have Indonesian trustees. The phase 2 review of Indonesia is scheduled for the first half of 2013. See EOI portal page for Indonesia: http://www.eoi-tax.org/jurisdictions/ID
Macao, China: The legal and regulatory framework for the exchange of information is largely in place in Macao, China, but some areas need improvement. The report recommends that Macao, China clarify its legislation concerning ownership and accounting information of foreign companies and the need for entities to keep underlying documentation related to accounting records. With reference to bearer shares, Macao, China should either ensure that robust mechanisms are in place to identify the owners of such bearer shares or abolish them. The report also recommends improvements in the EOI network to ensure agreements to the standard are in place with all relevant partners. Macao, China’s Phase 2 review is scheduled for the first half of 2013. See EOI Portal page for Macao, China: http://eoi-tax.org/jurisdictions/MO
Malaysia: The legal and regulatory framework for the availability and exchange of information is largely in place in Malaysia, though some areas need improvement. The report recommends that Malaysia’s competent authority should have the power to obtain all relevant information, including bank information, to respond to requests made pursuant to any double tax convention or taxation information exchange agreement. The report also identified small gaps concerning availability of accounting information in the Labuan International Business Financial Centre and availability of ownership and accounting information with respect to certain nominee arrangements and trusts in Malaysia. Malaysia’s Phase 2 review is scheduled for the first half of 2013. See EOI Portal page for Malaysia: http://eoi-tax.org/jurisdictions/MY
Uruguay: Uruguay has made progress in improving its legal and regulatory framework in order to be able to effectively exchange tax information, and recently signed its 10th EOI agreement. However, some deficiencies have been identified in its domestic laws, particularly with regards to bearer shares, and identity information relating to certain trusts. Possible impediments to effective access to information were also identified as a result of a notification right allowed to taxpayers, and the duty of confidentiality imposed on trustees. Uruguay also needs to continue to expand its network of EOI agreements, particularly with its most important economic partners. Uruguay has been assessed as not being ready to move to the next phase of its evaluation. Uruguay’s position will be reviewed in six months time. See the EOI Portal page for Uruguay:http://eoi-tax.org/jurisdictions/UY
Vanuatu: The peer review of Vanuatu identified significant deficiencies in the availability of information in Vanuatu as well as its access powers. Although Vanuatu has signed 12 treaties to the standard, it does not have any powers to access information, therefore its treaties cannot be considered to be effective. In addition, accounting requirements are not in place to the international standard for all relevant entities. Vanuatu has been assessed as not being ready to move to the next phase of its evaluation. Vanuatu’s position will be reviewed again in six months. See EOI Portal page for Vanuatu: http://eoi-tax.org/jurisdictions/VU
Mauritius: Mauritius has introduced legislation that addresses the gap regarding accounting requirements for GBC2s (non-tax resident Global Business Licence companies). Mauritius also continues to upgrade its network of agreements and recently signed its first Tax Information Exchange Agreement. The original peer review report identified some doubts regarding Mauritius’ ability to exchange certain types of information in practice, and Mauritius has now shown that it has gained experience in exchanging this type of information. Mauritius should now address the remaining recommendations in its review report. See EOI Portal page for Mauritius: http://eoi-tax.org/jurisdictions/MU
Monaco: A follow-up procedure was launched to ensure that Monaco was maintaining its efforts to establish agreements allowing for the exchange of information. The supplementary report shows that Monaco’s efforts are continuing and its commitment to the standard has remained steadfast. Monaco is willing to expand its network of double tax conventions and also taxation information exchange agreements. The phase 2 review of Monaco is scheduled for the second half of 2012. See EOI Portal page for Monaco: http://eoi-tax.org/jurisdictions/MC
San Marino: San Marino has swiftly introduced legal and regulatory changes to address all deficiencies identified in its 2010 phase 1 review concerning the availability of ownership and accounting information. The tax authority’s powers to access information have also been strengthened and they can now access all relevant information requested by foreign partners. San Marino also passed a law which enables it to provide information on a unilateral basis to any jurisdiction where there is an initialled or signed agreement for the exchange of information in tax matters. The Phase 2 review of San Marino will take place in the second half of 2012. See EOI Portal page for San Marino: http://eoi-tax.org/jurisdictions/SM
The Turks and Caicos Islands: The Turks and Caicos Islands has amended key legislation to address the deficiencies identified in its August 2011 review relating to the availability of accounting information and the competent authority’s powers to obtain and exchange information. These changes significantly improve its legal framework for exchange of information. The Turks and Caicos Islands’ progress on the remaining recommendations will be assessed in its Phase 2 review which is scheduled to take place in the first half of 2013. See EOI Portal page for the Turks and Caicos Islands: http://www.eoi-tax.org/jurisdictions/TC
The Virgin Islands (British): The Virgin Islands has moved very quickly to address the shortcomings identified in its 2011 review in respect of the access to information. Their amended law now provides for powers to access and exchange all foreseeably relevant information. In addition, the Virgin Islands has taken all necessary steps to ratify the TIEAs it concluded. A number of other recommendations concerning the availability of ownership and identity information as well as accounting records remain and these will be considered in the phase 2 review of the Virgin Islands, to take place in the second half of 2012. See EOI Portal page for the Virgin Islands (British): http://www.eoi-tax.org/jurisdictions/VG
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