blacklist, Convention on mutual administrative assistance in tax matters, G-20 major economies, Global Forum, London, OECD, OECD Global Forum on Transparency and Exchange of Information for Tax Purposes, offshore banks, Offshore financial centre, Organisation for Economic Co-operation and Development, tax fairness, tax haven, tax justice
On page 11 of the OECD report to the recently concluded G8 Summit titled “A Step Change in the Transparency Agenda” is the following footnote:
“In view of the next G20 Summit, we also strongly encourage all jurisdictions to sign or express interest in signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and call on the OECD to report on progress. See paragraph 14 of 19 April Communique of G20 Finance Ministers and Central Bank Governors.
Paragraph 14 of the 19 April Communique of the G20 Finance Ministers and Central Bank Governors reads as follows:
“More needs to be done to address the issues of international tax avoidance and evasion, in particular through tax havens, as well as non-cooperative jurisdictions. We welcome the Global Forum’s report on the effectiveness of information exchange. We commend the progress made by many jurisdictions, but urge all jurisdictions to quickly implement the recommendations made, in particular the 14 jurisdictions, where the legal framework fails to comply with the standard.
Moreover, we are looking forward to overall ratings to be allocated by year end to jurisdictions reviewed on their effective practice of information exchange and monitoring to be made on a continuous basis. In view of the next G20 Summit, we also strongly encourage all jurisdictions to sign or express interest in signing the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and call on the OECD to report on progress.
We welcome progress made towards automatic exchange of information which is expected to be the standard and urge all jurisdictions to move towards exchanging information automatically with their treaty partners, as appropriate.
We look forward to the OECD working with G20 countries to report back on the progress in developing of a new multilateral standard on automatic exchange of information, taking into account country-specific characteristics. The Global Forum will be in charge of monitoring. We welcome the progress made in the development of an action plan on tax base erosion and profit shifting by the OECD and look forward to a comprehensive proposal and a substantial discussion at our next meeting in July.”
The clear mandate from the G20 Finance Ministers and Central Bank Governors to the OECD is to create a ranking – a list – of jurisdictions based on their Phase 2 Assessment on the effectiveness of their legal regime for exchange of information ‘on request’, which is the standard that OECD Global Forum endorsed at its 2009 meeting in Los Cabos, Mexico.
In addition to that Assessment, jurisdictions who had unresolved issues from their Phase 1 Assessment, though given a ‘pass’ to Phase 2, committed to providing updates about their progress in changing certain determinations made about their legal regime supporting information exchange from ‘not in place’ or ‘in place but needs work’ to ‘in place’.
The documents publicly available on the OED Global Forum (GF) website http://www.oecd.org/tax/transparency/provide no evidence that, at the last plenary session of the GF, held last year in South Africa, members agreed a ‘step change’ to the transparency agenda which has been the basis of their compliance activities since 2009.
Further, there has been no public information released to indicate that the GF will meet before September this year to consider what has emerged from the G8 meeting; and what will emerge from the next meeting of the G20 Finance Ministers and Central Bank Governors next month. GF Plenary sessions are held annually. This year if the meeting is held after September it means that GF members will have about 10 weeks to demonstrate satisfactory compliance under the Phase 1 & 2 Assessment criteria before the OECD is expected to produce its ‘rankings’. That is, of course,if GF members wait until the G20 confirms the expected move to ‘automaticity’.
Assuming therefore that, as was the case with the ‘on request’ transparency standard, recommended by the OECD, then accepted by the G8 and finally, confirmed by the G20 as the global standard; the new ‘automatic sharing’ standard, crafted by the OECD,now endorsed by the G8 ,will likely be confirmed by the G20 as the new standard this September.
As happened in 2009, by year-end the OECD may well produce a list of jurisdictions in ‘substantial compliance’ with the prevailing ‘on request’ standard. Given though that the 2012 ‘whitelist’ excludes only one member of the GF – Nauru – any adjustment to the ranking will likely be based on new information available since that table was published.
I suspect that the reason why the OECD, in its report to the G8, reiterated the recommendation by the G20 Finance Ministers and Central Bank Governors that all jurisdictions should sign up to the new ‘automatic’ standard, or at least express a willingness to do so, is to avoid GF members being ‘blacklisted as a ‘tax haven’ or an ‘uncooperative jurisdiction’.
The implication may be that even if a jurisdiction’s assessments are insufficient to justify a ‘pass’ under the old dispensation, this can be remedied by its early acceptance of the new ‘automatic’ standard, evidenced by signing or expressing an interest in signing the OECD Multilateral Convention on Mutual Assistance in Tax Matters.
Indeed, this may well explain the significant up-tick in interest from GF members in the OECD Multilateral Convention since the April meeting of the G20 Finance Ministers and Central Bank Governors.
My prediction, based on the above, is that the next OECD ranking of countries will include a category of jurisdictions who have indicated no interest in the new automatic exchange of information standard and have yet to receive a passing grade in either one or both of their assessments.
What do not know is whether a jurisdiction who is fully compliant with the elements in both assessments, if such a jurisdiction exists, will still be blacklisted by the OECD,if they too, express no interest in ‘automaticity’.