TIEAs » Tax Research UK

Why hasn’t Jersey signed a TIEA with India? Was it Jersey would not play ball?

India, Jersey, TIEAs Comments Off

Mar 222011

The following comes from the blog of ‘Tony, The Prof’ in Jersey, and seems highly pertinent, following in the wake of news that despite much prior trumpeting that it would happen Jersey failed to sign a tax information exchange agreement with India last week when an official delegation from the island was in the country.

The question really is – why did India send Jersey packing – because that’s what seemd to have happened. Might it be that they saw through the charade of a tax information exchange agreement Jersey put on offer?

The JEP reported [last week] that “TREASURY Minister Philip Ozouf today declined to comment on why the signing of an historic tax agreement with India had been called off. The signing of this tax information exchange agreement was due to be the centrepiece of the current trade mission to Mumbai and Delhi, which has been months in the planning. Senator Ozouf was expected to put his signature to it today, alongside the Indian Minister of State from Revenue SS Shri Palanimanickam at the Ministry of Finance, in the capital of the sub-continent. However, the ceremony was called off and the document is having to be redrafted, apparently because Indian officials were not happy with what it said.” (1)

It is clear from press released before this occurred that this was to be one of the planned highlights of the trip to India. Indeed, it is described in one report as the “culmination” of the trip, which is why no doubt Senator Ozouf went off on this trip rather than the Economic Development Minister, Alan Maclean. After all, when he was Economic Development Minister, it was Senator Ozouf rather than the Treasury Minister Terry le Sueur who jetted off to the Far East:

A Jersey delegation consisting of States of Jersey Ministers, the Director-General of the Jersey Financial Services Commission and representatives of Jersey’s finance industry arrived in India on 13th March for a five day visit designed to highlight and promote the new Jersey Finance representation in Mumbai and Delhi and which willculminate in the signing of the TIEA on 18th March. The signing of the TIEA is an important step in facilitating business flows between Jersey and India and demonstrates Jersey’s commitment to operating within the highest international standards. The move will take the total number of similar agreements Jersey has signed to 21, including agreements with countries such as the USA, UK, France, Germany and China. (2)

Jersey finance is playing this down as a “delay”. Now I can’t see how “refuse to sign” gets turned into “delay”, but that’s the new message coming from Geoff Cook, which contradicts the earlier “culmination”, and puts the blame in the hands of back office officials. And didn’t it “take months in the planning”?

Jersey Finance, the body responsible for promoting Jersey’s finance industry, has said that the delay in signing a Tax Information Exchange Agreement (TIEA) with India will not have an impact on business flows between Jersey and India or planned future growth. Responding to news of the delayed signing, Jersey Finance CEO, Geoff Cook, said: “TIEA’s take a number of months to prepare and so it is understandable that on this occasion the formal signing could not be completed to coincide with our visit to India marking the introduction of permanent Jersey Finance representative in the country. We have every confidence that the agreement will soon be in place and when it is, the platform for growing business between Jersey and India will be strengthened further.”(3)

But there is a more obvious reason for this happening. India, according to the Economic Times of India, is looking for more teeth to the TIEAs. In 2010, this report was published:

New Delhi is expected to present a detailed paper on the issue at the forthcoming Seoul meeting, urging that domestic laws of countries must support such agreements for effective information exchange. “These agreements should ensure that there is actual flow of information and benefits for countries entering them (agreements) in checking evasion,” said a finance ministry official privy to the discussions. In some countries, for instance, domestic laws relating to privacy protection tend to come in the way of sharing information with other countries, defeating the very purpose of such pacts.(4)

And in February 19 2011 – this year, the same paper notes that:

NEW DELHI: India will seek strong action by the Group of Twenty (G20) nations against tax havens as it feels any unilateral action can act as a deterrent against foreign investment. “Multilateral action is more effective,” a finance ministry official said, ahead of the meeting of G20 finance ministers and central bankers in Paris. India also wants improvement in the quality of information that is shared under TIEAs to make such agreements more meaningful. India will urge the G20 to pressure tax havens into revealing more information on black money from India, the official added.

Prime Minister Manmohan Singh’s government is under pressure to bring back illicit funds stashed abroad, but finds itself facing jurisdictions with which it has little leverage. A report by Washington-based think-tank Global Financial Integrity (GFI) puts such fund flows at about $16 billion a year from 2002-2006. “Any form of curbs on a country cannot work at unilateral level, as such an action can discourage foreign investments,” the official said. India has already made a strong pitch for tax information exchange agreements (TIEAs) with greater teeth at the G20 to facilitate a meaningful exchange of information on fund flows and monies parked in such jurisdictions.(5)

It is unclear exactly what this entails, but it is likely that it means more than signing to the standard clauses on TIEAs, which guard against any fishing expeditions. Interesting the recently signed agreement between India and the Bahamas has all the usual stuff, about needing the name of the individual, and what is being investigated, but also has this interesting Article 6 on Tax Examinations abroad, which might be the point at issue in the drafting and approval of the Jersey TIEA. It certainly seems to have more bite than just requests for information:

Article 6: Tax Examinations Abroad

1. At the request of the competent authority of the requesting Party, the requested Party may allow representatives of the competent authority of the requesting Party to enter the territory of the requested Party, to the extent permitted under its domestic laws, to interview individuals and examine records with the prior written consent of the individuals or other persons concerned. The competent authority of the requesting Party
shall notify the competent authority of the requested Party of the time and place of the intended meeting with the individuals concerned.

2. At the request of the competent authority of the requesting Party, the requested Party may allow representatives of the competent authority of the requesting Party to be present at the appropriate part of a tax examination in the requested Party, in which case the competent authority of the requested Party conducting the examination shall, as soon as possible, notify the competent authority of the requesting Party about the
time and place of the examination, the authority or official designated to carry out the examination and the procedures and conditions required by the requested Party for the conduct of the examination. All decisions with respect to the conduct of the tax examination shall be made by the Party conducting the examination. [6]

Links
(1) http://www.thisisjersey.com/2011/03/18/indian-officials-refuse-to-sign-tax-agreement/#ixzz1HAlW5Qqc
(2) http://www.ameinfo.com/259611.html
(3) http://www.jerseyfinance.je/News/Delay-to-TIEA-signing-with-India-will-not-affect-business-opportunities-say-Jersey-Finance/
(4) http://economictimes.indiatimes.com/news/economy/finance/India-likely-to-pitch-for-deeper-tax-information-exchange-at-G-20-meet/articleshow/6136834.cms
(5) http://economictimes.indiatimes.com/articleshow/7525591.cms?prtpage=1
(6) http://www.bahamas.gov.bs/bahamasweb2/home.nsf/vContentW/MOF–Tax+Information+Exchange+Agreements–TIEA+attachments/$FILE/India%20Bahamas%20TIEA%2011%20February%202011.pdf

Reproduced with permission

Let’s not celebrate the TIEA between St Kitts and and the Faroe Islands

TIEA, TIEAs Comments Off

Mar 292010

Progress on Exchange of Information in the Caribbean – News – Bahamas Financial Services Board.

The Bahamas want to celebrate:

The Organisation for Economic Cooperation & Development announced today that Anguilla, St. Kitts and Nevis and St. Vincent and the Grenadines have become the 23rd, 24th and 25th jurisdictions to move into the category of jurisdictions that are considered to have substantially implemented the standard since April 2009. Since that time almost 370 agreements have been signed or brought up to the internationally agreed tax standard.

During the past week Saint Kitts and Nevis, Saint Vincent and the Grenadines and Anguilla, an overseas territory of the United Kingdom, have signed a total of 14 tax information exchange agreements. These signings bring the total number of agreements signed by each jurisdiction to at least 12 that meet the internationally agreed tax standard.

St. Kitts and Nevis and St. Vincent and the Grenadines today signed agreements with Faroe Islands, Finland, Greenland, Iceland, Norway and Sweden. These agreements add to agreements St. Kitts and Nevis had already signed with Australia, Monaco, The Netherlands, The Netherlands Antilles, Aruba, United Kingdom, Denmark, Belgium, New Zealand and Liechtenstein, bringing their total to 16 agreements. St. Vincent and the Grenadines has now signed 16 agreements that meet the standard, including its existing agreements with Australia, Austria, Denmark, the Netherlands, Aruba, Liechtenstein, Belgium, Ireland, the United Kingdom and New Zealand.

Oh come on, let’s take this seriously. Is anyone really saying St. Vincent and the Grenadines and Greenland or St. Kitts and Nevis and The Netherlands Antilles TIEAs really contribute in any way to financial transparency.

It’s time for the OECD to draw a halt to this farce of claiming compliance on the basis of such l agreements which they know, and everyone else knows, have no substance at all.

Budget 2010: the Belize gambit

TIEAs Comments Off

Mar 242010

Budget 2010: the Belize gambit | Richard Murphy | Comment is free | guardian.co.uk .

Alistair Darling won a rousing cheer for announcing a crackdown on Lord Ashcroft’s tax haven. But we should read the small print.

Or so I say over at the Guardian. Follow the link, above.

UK presses ahead on information exchange

TIEAs Comments Off

Feb 102010

Developing nations asked to join tax exchange | UK | Reuters .

The UK government said on Tuesday it had asked developing nations to swap information to crack down on tax avoidance, ahead of a financial crime conference on Wednesday.

Treasury minister Stephen Timms wrote to 16 countries, including Jamaica, Cameroon, South Africa and Vietnam with the aim of setting up a multilateral tax information exchange involving Britain by the end of the year.

Stephen Timms is certainly making his mark in all the right ways.

This one is another step towards multilateral automatic information exchange .

Building accountable taxation

OECD, Tax Justice Network, TIEAs Comments Off

Jan 282010

Attiya Waris of Tax Justice Network is addressing the OECD meeting. She says there are seven key words in tax:

Transparency
Accountability
Responsibility
True
Fair
Efficient
Effective

She says changes tax is changing. In Kenya indirect tax does not create tax awareness, and it can’t work because it is dependent on literacy. This breaks down the link between state and society.

Direct taxes have to create this. This is done by allocating tax to community level so local choice can be made on how to use revenues. This also means accountability rises and transparency and responsibility with it. This is bottom up change.

Now she says it is time for the OECD to deliver a top down delivery of data. But this will not happen or be useful if the IMF and World Bank undermine direct taxation systems by promoting VAT.

She says the MNC claiming it pays tax is OK – but they can’t substitute for local tax relationships to build accountability. They shouldn’t be claiming they’re good people for paying tax – it is their obligation.

And finally she argues for multilateral information exchange to allow bilateral deals to work. Until developing countries have enough data to make bilateral requests the Tax Information Exchange Agreements programme will be stalled in its effectiveness. This is at the core of information exchange issues, as I’ve argued for some time.

Tax-Haven Crackdown ‚ÄòBig Success’ says OECD

TIEA, TIEAs Comments Off

Jan 202010

Tax-Haven Crackdown ‚ÄòBig Success’ as OECD Begins Review Process – Bloomberg.com.

As Bloomberg notes:

Cracking down on tax havens has been “one of the big success stories” of the Group of 20’s efforts in the financial crisis, the OECD said, as the Group shifts from naming-and-shaming to ensuring compliance with tax standards.

The Paris-based Organization for Economic Cooperation and Development said 195 tax-information exchange agreements were signed last year as countries faced fresh scrutiny from the G- 20, up from 23 in 2008. Nineteen countries that had been branded as not sufficiently meeting international standards were removed from that category on the OECD’s so-called gray list.

Well, if big is relative and better then the nothing the OECD achieved from 2002 to 2008 then this is correct.

But it’s a very, very long way from a major success.

As I’ve noted time and again the Tax Information Exchange Agreements the OECD promotes can only be useful if there is also automatic information exchange to provide the ‘smoking gun’ proof that a person is undoubtedly the beneficial ownership of a financial structure in another jurisdiction. Without that the number of requests under TIEAs will be miniscule – hundreds maybe a year – and that has not deterrent effect.

Second, saying that signing 12 such agreements is enough to establish international acceptability is ludicrous. There are more than 12 countries in the G20 for a start, 27 are in the EU, there are over 230 tax jurisdictions in the world (some say slightly more). Why 12?

The goal has to be comprehensive coverage of Tax Information Exchange Agreements which can only eventually be achieved on a multilateral basis and full automatic information exchange on the beneficial ownership (for now) of all offshore structures (where offshore simply means ownership is one jurisdiction but the transaction is recorded in another) with in the long term income and other data all exchanged as well.

Then we beat tax fraud for good.

And other fraud.

And money laundering.

And a great deal of crime.

And corporate corruption.

And bribery.

And why would anyone be opposed to that?

The OECD needs to be brave: it’s horizons are too limited. Now is the time for it to break out and go for real reform.

TIEAs – Monaco is taking the Mickey

OECD, TIEAs 10 Responses »

Jan 132010

I’m in Brussels talking about automatic information exchange today (and country-by-country reporting tomorrow).

It’s interesting to hear someone (I don’t think I can or should name him) close to the OECD Global Forum review group on information exchange saying that they are well aware that places like Monaco are taking the Mickey when seeking to appear internationally compliant with OECD standards by signing almost all their Tax Information Exchange Agreements with other tax havens.

And they say these places will fail the review process.

I hope they’re top of the pile for that reason.

While we rail at MPs, the City gets away with murder

Tax Havens, TIEAs Comments Off

Nov 082009

While we rail at MPs, the City gets away with murder | Nick Cohen | Comment is free | The Observer .

Nick Cohen refers to yours truly in the Observer:

A year ago, the world seemed willing to tackle the secrecy of the tax havens that hid so many of the bubble’s catastrophic deals. All we have ended up with is tinkering. The OECD‘s recent Tax Information Exchange Agreements do nothing to identify the beneficial owners of trusts and companies run through the Channel Islands, Caribbean, Monaco and Lichtenstein. As Richard Murphy of Tax Research UK says, they provide the illusion of reform rather than the real thing.

And as he notes:

They are not alone in that. Mervyn King, once regarded as an establishment man, is arguing for a British Glass-Steagall Act to protect public money by separating high street banks from the casino operations of investment banks. Instead of seizing the chance for change, Gordon Brown and Alistair Darling – who are Labour politicians, in case you have forgotten – are fighting him all the way.

What a waste of a crisis.

Foot – automatic information exchange is inevitable?

Secrecy jurisdictions, Tax Havens, TIEAs 5 Responses »

Oct 292009

This from page 10 of the Foot report:

It is anticipated that standards in this area will continue to rise and even those of the nine jurisdictions within the scope of this Review that have met or exceeded the current standard of 12 TIEAs should continue to enter further agreements with relevant countries. This imperative is well understood and it is appropriate that the commitment to tax transparency shown by a number of the jurisdictions has been recognised in statements by the UK Government.

The nine jurisdictions must show a commitment not just to the letter but also the spirit of international standards. Effective implementation will be an important test of this and evidence will be provided by the OECD’s Global Forum through a monitoring and peer review process. It is vital that competitor jurisdictions show the same commitment.

In the longer term, the trend for greater transparency is likely to result in pressure to move to a system of automatic exchange of information with the aim of combating tax evasion by individuals on a cross-border basis.

I think that a hint that he thinks automatic information exchange is on its way – but not just yet.

It’s also clear indication he accepts Tax Information Exchange Agreements do not work.

We’ll keep the pressure on them.