Earlier this month, Germany agreed to deduct 20 per cent retention tax from the interest payments made to residents unless they voluntarily disclose income information to the relevant fiscal authorities.
This is the third of such agreements made by Jersey which already has arrangements with the US and the Netherlands.
Sixteen tax information exchange agreements have been signed since the beginning of 2007. Currently, only Liechtenstein, Monaco and Andorra have refused to engage with the Organisation for Economic Co-operation and Development on the exchange of information. The European savings tax directive reached its third birthday on July 1 and raised retention tax from 15 per cent to 20 per cent, bringing it level with the basic rate of UK income tax. The retention tax rate is set to rise to 35 per cent from July 1, 2011.
Jersey authorities have reported 35m in retention tax for 2007 and said that 61,600 people opted for voluntary disclosure in that period. Under the agreement, 75 per cent of the tax retained will be sent to the individual member states concerned and the remaining 25 per cent will be retained by the comptroller of income tax.
Commenting on the latest tax information agreement, international tax consultants Bowman & Associates principal Jeff Bowman says: This will certainly flush out some of the tax cheats and Germany is most guilty of that. People who exercise proper tax planning have nothing to worry about with this change.”