Are TIEAs Past Their ‘Sell By’ Date?

Maybe! Sixty more countries have signed, or indicated their commitment to sign the OECD Multilateral Convention on Mutual Administrative Assistance in Tax Matters (‘the Convention’). This multilateral agreement provides for spontaneous taxpayer information exchange, simultaneous tax assessments and assistance in the collection of taxes.

OECD Secretary General Angel Gurría has touted this latest wave of admissions as another winning round in the fight against tax cheats; claimed this to be another important milestone on the road to closer cooperation and more transparency; and believes that it will make the international system fair to all taxpayers.

Austria, Belize, Estonia, Latvia, Luxembourg, Nigeria, Saudi Arabia, Singapore and the Slovak Republic have all signed the Convention. While Burkina Faso, Chile  and  El Salvador have signed a letter of intention to sign the Convention. Belize, Ghana, Greece, Ireland, Malta, the Netherlands (including its Caribbean islands of Bonaire, Sint Eustatius and Saba), Aruba, Curaçao and Sint Maarten have all deposited their instruments of ratification. Morocco too, has recently signed the Convention.

http://www.saudigazette.com.sa/index.cfm?method=home.regcon&contentid=20130531167947

With strong G-20 support for yet another OECD crafted agreement which, before the intervention of the G-20, lay languishing in the corridors of the Paris-based Organisation, sooner rather than later, acquisence to bilateral exchanges of information ‘on request’ will likely be insufficient to demonstrate compliance and cooperation in matters of tax transparency.

After more than five years of frenzied TIEA-making, it is perhaps little wonder that countries have grown tired of this labour-intensive, intellectually uninspired, two-by-two methodology to silence their critics and stave off threats of sanction. This is especially so since the framers of the model Tax Information Exchange Agreement (TIEA) have themselves continued to fuel doubts about the effectiveness of this brand of tax cooperation.

The shelf-life of the TIEA is fast approaching as the G-20, energized by the promise of FATCA style information exchange, hasten the adoption of more multi-lateral methods to achieve transparency and tax information exchange. In fact, ahead of the next G-8 Summit to be held this year from June 17-18 at the golfing resort of Lough Erne, Northern Ireland, UK Prime Minister and Chair of the G-8, has made clear his intention to use his tenure to push for the adoption of the EU Savings Tax Directive, as a precusor to the global adoption of automatic exchange of information standards.

Unlike international trade, multilateralism in matters of international tax cooperation is generally unheard of, as few countries are  able to back the extra-territorial extension of their own domestic tax laws with the same ‘might’ as the US government. As a result, harmonization has been achieved incrementally, through bilateral negotiation.

For the over one hundred OECD Global Forum (OECD GF) members, which include some of the new signatories to the Convention, does this mean that they are now absolved from having to negotiate further TIEAs to demonstrate compliance with international standards on tax information exchange?

What about those signatories to the Convention who are not yet members of the OECD GF and have therefore not undergone a Phase 1, or Phase 2 assessment of their legal and administrative structures supportive of increased tax cooperation and transparency? Will they escape sanction from the G-20 and OECD?

What about OECD GF members still unsure about the currency of their compliance, because of their continuing participation in the periodic reporting that attends their Phase 1 and Phase 2 assessments? What is the new TIEA threshold to secure immunity from complaint? Is it now met by signature to the Convention?

Smart states must be asking themselves whether the Convention trumps TIEAs; and does it provide ‘automatic’ immunity from blacklisting and sanction by other signatories to the Convention?

Certainly, it would seem to take the pressure off jurisdictions who, for strategic economic reasons, do not want to dilute their competitive advantage by negotiating a plethora of bilateral TIEAs, instead of concluding new economic agreements, like tax treaties; especially when signing up to one multi-lateral agreement might well do the trick.

A word to offshore financial centres (OFCs) lamenting that the goal posts have again shifted in matters of international tax competition……This is no excuse not to adjust your tactics, and crying over spilled milk that has almost expired is certainly not going to help either.

(For an example of a proactive approach: http://www.gov.je/News/2013/pages/SupportForOECD.aspx)

Advertisements

6 thoughts on “Are TIEAs Past Their ‘Sell By’ Date?

    1. Hiya! I can be a bit of a procrastinator myself sometimes. Thanks for the comment and having a read of my blog. Stick with it any you’ll find you’ll get more done. Fran

      Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s