G-20 declares end to bank secrecy; OECD updates list of "uncooperative jurisdictions"
The leaders of the G-20 countries, meeting in London on 2 April 2009, called for an end to bank secrecy and threatened sanctions against uncooperative jurisdictions identified by the OECD in a new, tiered "progress report". But, despite calls from the French government, no sanctions have yet been imposed.
As part of the G-20 summit to tackle the financial crisis, leaders made commitments toward strengthening international financial supervision and regulation, and agreed, "to take action against non-cooperative jurisdictions, including tax havens".
"We stand ready to deploy sanctions to protect our public finances and financial systems," the G-20 leaders wrote in a communique. "The era of bank secrecy is over."
To this end, the G-20 agreed to develop a toolbox of counter measures for countries to consider, which include:
- Increased disclosure requirements on the part of taxpayers and financial institutions to report transactions involving non-cooperative jurisdictions;
- Withholding taxes in respect of a wide variety of payments;
- Denying deductions in respect of expense payments to payees resident in a non-cooperative jurisdiction;
- Reviewing tax treaty policy;
- Asking international institutions and regional development banks to review their investment policies; and,
- Giving extra weight to the principles of tax transparency and information exchange when designing bilateral aid programs.
"We have agreed that there will be an end to tax havens that do not transfer information on request. The banking secrecy of the past must come to an end," said UK Prime Minister Gordon Brown at the close of the summit. "We have agreed [on] tough standards and sanctions for use against those who don't come into line in the future."
To coincide with the summit, the OECD published a Progress Report that consisted of a new "tiered" list assessing the implementation of information exchange standards among jurisdictions surveyed by the OECD's Global Forum on Transparency and Exchange of Information. This breaks the jurisdictions down into a "white list" of those that have substantially implemented OECD standards, a "grey list" of those that have made commitments but have not yet substantially implemented the standards, and a "black list" of those that have not committed to OECD standards.
The internationally agreed tax standard requires exchange of information on request in all tax matters for the administration and enforcement of domestic tax law without regard to a domestic tax interest requirement or bank secrecy for tax purposes. In 2008, an OECD sub-committee recommended that the new standard for countries should be to have a minimum of 12 signed Tax Information Exchange Agreements.
The "white list" of jurisdictions that have substantially implemented the internationally agreed tax standard comprises: Argentina, Australia, Barbados, Canada, China, Cyprus, Czech Republic, Denmark, Finland, France, Germany, Greece, Guernsey, Hungary, Iceland, Ireland, Isle of Man, Italy, Japan, Jersey, Korea, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Russian Federation, Seychelles, Slovak Republic, South Africa, Spain, Sweden, Turkey, United Arab Emirates, United Kingdom, United States and the US Virgin Islands.
The "grey list" of jurisdictions that have committed to the internationally agreed tax standard, but have not yet substantially implemented was divided into two categories - Tax Havens and Other Financial Centres.
The "tax havens" comprised: Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Belize, Bermuda, British Virgin Islands, Cayman Islands, Cook Islands, Dominica, Gibraltar, Grenada, Liberia, Liechtenstein, Marshall Islands, Monaco, Montserrat, Nauru, Netherlands Antilles, Niue, Panama, St Kitts and Nevis, St Lucia, St Vincent & Grenadines, Samoa, San Marino, the Turks and Caicos Islands and Vanuatu.
The "other financial centres" comprised: Austria, Belgium, Brunei, Chile, Guatemala, Luxembourg, Singapore and Switzerland.
A flurry of commitments had brought 11 jurisdictions, - Switzerland, Liechtenstein, Austria, Belgium, Luxembourg, Andorra, Monaco, San Marino, Hong Kong, Singapore and Macao - into the this category. But the Report showed that more than half of the committed jurisdictions had not yet entered into any tax information exchange agreements.
The "black list" of jurisdictions that had not committed to the internationally agreed tax standard comprised: Costa Rica, Malaysia (Labuan), Philippines and Uruguay.
By 7 April, the OECD announced that these four jurisdictions had officially made commitments to co-operate and would be proposing legislation this year to remove the impediments to the implementation of the OECD standard. As a result, they had all been moved to the "grey list" category and its three-tiered tax haven had essentially been reduced to a two-tiered list.
Hong Kong and Macau were notably absent from the lists but were mentioned in a footnote as having committed to implement the OECD standards on information exchange. The OECD had asked for and received assurances that the standard would be adopted, and the OECD stands behind Hong Kong and Macau's adoption of the standard, said OECD Secretary General Angel Gurria.
The Chinese government's position was important because of Hong Kong and Macau's status as special administrative regions, or integral regions of China, and the OECD believed there was "a very strong encouragement by the Chinese government for them to move to the standard," he added.
Gordon Brown has set a September deadline for British Crown Dependencies and Overseas Territories to meet OECD standards of tax information sharing or face sanctions. He acknowledged the progress made by them in committing to OECD standards.
Seven UK overseas territories - Anguilla, Bermuda, the British Virgin Islands, the Cayman Islands, Gibraltar, Montserrat and the Turks and Caicos - remain on the OECD "grey list" for failing to agree a sufficient number of information sharing agreements. He urged them to achieve the standard of 12 TIEAs or equivalent arrangements before the UN General Assembly in September.
He also urged the three Crown Dependencies - the Isle of Man, Jersey and Guernsey - who all appear on the "white list" to continue to set the pace and put clear water between themselves and those jurisdictions which only just meet the international standard.
Delicious
StumbleUpon
Facebook
Newsvine
Digg