In the wake of the global recession, the bigger economic powers tried to point the finger at offshore financial centres and intensified their push for greater tax transparency.
The better-regulated OFCs welcome this move. The Isle of Man, Guernsey and Jersey have been leaders in signing bilateral tax transparency treaties with a range of bigger economies. In some cases, their progress has been slowed only by cumbersome administrative processes in co-signatory states.
The Isle of Man and the Channel Islands have broken new ground and were on the Organisation for Economic Cooperation and Development’s white list when it was published on April 2. They were followed by several other jurisdictions, including Bermuda, the British Virgin Islands and the Cayman Islands as the summer progressed.
Minds turned to the future and the grandly titled 5th Global Forum on Transparency and Exchange of Information scheduled to be attended by more than 100 governments in Los Cabos, Mexico on September 1. Hurricane Jemina put paid to the location and on Bank Holiday Monday the venue was hurriedly shifted to Mexico City.
Isle of Man assessor of income tax Malcolm Couch says: “The key issues at the meeting are the autonomy of the tax transparency process and the introduction of the peer review process. The Isle of Man welcomes the move to establish the Global Forum as a self-standing auton- omous body outside the OECD but using its knowledge and experience. We also strongly support the introduction of peer review.”
The move to put the Global Forum outside the direct control of the OECD has emerged because the major economies were perceived to control the tax agenda of the organisation. Other states, including offshore financial centres, have tried to create a level playing field where all jurisdictions could play a part in determining the direction of tax transparency.
“While offshore centres can offer tax-efficient products and services, there will be higher standards of reporting to home jurisidictions.”
This year, jurisdictions have been chasing a new numerical target of 12 tax information exchange agreements or their equivalents. Earlier in the summer, there was considerable debate about raising the target. That has been put on the back-burner while the participants focused on peer review and future structure.
OECD director for tax policy and administration Jeffrey Owens says peer review will determine the quality of agreements signed and the efficiency with which signatory jurisdictions administer them.
This means that the practice of exchange of tax information between states will become a paramount issue and peer review which ensure that it works. The Mexico meeting backed the idea.
States of Guernsey chief executive Mike Brown says: “We firmly endorse peer review. Guernsey has been fully behind the move to greater transparency. We must ensure that jurisdictions have the administrative capacity to deliver on this key issue.”
Before the Mexico meeting, there was considerable debate over the proposals between the attending states ready to endorse the plans.
The delegations went to Mexico with a clear commitment to peer review starting shortly.
At an earlier stage, the debate over the structure of the Global Forum was polarised. The bigger economies wanted it to remain within the ambit of the OECD. Others, including offshore centres, favoured a wholly independent structure such as the Inter- national Organisation of Securities Commissions.
In practice, they have decided on an autonomous body with links to the OECD to draw on its facilities, including its widespread knowledge and expertise in international tax.
The Mexico meeting has now set the ball rolling to a new approach to exchange of tax information. The focus is now on quality of agreements, compliance structures and capacity to deliver.
For taxpayers, it means that while offshore centres can offer tax-efficient products and services, there will be higher standards of reporting to home jurisidictions.