Next month the OECD Global Forum (OECD GF) will shift its attention to the Phase 2 Assessments of its members.
In this follow-up to the Phase 1 Assessments, the OECD GF will evaluate the effectiveness of its members practical implementation of the legal and regulatory systems supporting the globally endorsed standards on transparency and information exchange.
The first batch of Phase 2 Assessments will be conducted on the following countries by the end of this year:
British Virgin Islands, Bermuda, Austria, Cayman Islands, Hong Kong, Guernsey, Liechtenstein, Cyrus, Malta, Luxembourg, India, Qatar, Monaco, San Marino, Switzerland Singapore, and the Bahamas.
While by the middle of next year these jurisdictions are due to be assessed:
Bahrain, Malaysia, Estonia, Samoa, Jamaica, Slovak republic, Philippines, Slovenia, Turks and Caicos, U.S Virgin Islands, United Arab Emirates, Vanuatu, Barbados, Indonesia, Brunei and Macao.
Phase 2 evaluations will use the same criteria employed in Phase 1, and will be based on the following 3 broad elements:
- The availability of information, in particular accounting, banking and ownership information;
- The access to information and powers to obtain it by the competent authorities in particular without a domestic tax interest requirement, and without hurdles which would unduly delay information exchange; and
- Whether exchange of information mechanisms (which are generally bilateral agreements, such as tax treaties, tax information exchange agreements, multilateral conventions or unilateral domestic legislation) provide for effective exchange of information.
Unlike the case with Phase 1 however which only made judgements based on whether the criteria were ‘in place’, Phase 2 testing will apply four ratings of:
- Largely compliant
- Partially compliant
This is the real test of a country’s transparency and information exchange credentials. Failure to pass muster first time around will no doubt trigger another wave of G-20-led recrimination which OFCs can ill afford.