The focus of the Major Players has in recent times
centred on transparency and the willingness to exchange taxation
information. These principles have become the benchmark for
assessing a particular jurisdiction and whether or not its
activities fall within the tax haven sphere.
Primarily, transparency seeks to tackle the issue of secrecy. In this context, the procedures a jurisdiction has in place to ensure that it adequately obtains and retains information concerning offshore clients and their activities becomes significant, as does their willingness to exchange such information. Secrecy may occur in tax havens on several levels.
In most common law jurisdictions, for example, secrecy manifests itself in the context of a bank's duty to observe confidentiality in relation to customer information, albeit that there are well established exceptions to this duty, for example that disclosure is permitted under compulsion of law. (1) However, it has been held that the compulsion of law exception to the duty of confidentiality relates to compulsion of law in the jurisdiction where the contractual relationship was created and not the compulsion of law of a foreign jurisdiction, (2) making it difficult for a foreign authority to gain access to such information.
In some jurisdictions, secrecy provisions may be entrenched in legislation, prohibiting disclosure of information in relation to the ownership of offshore entities, the transactions they engage in and the general affairs of the entity. There may or may not be exceptions to such provisions.
For the above reasons, taxation authorities may not be able to obtain access to information in relation to its own taxpayers, outside the scope of its jurisdiction.
The OECD International Tax Standard
The OECD's Global Forum on Transparency and Exchange of Information has developed standards of transparency and exchange of information. They serve as a model for the vast majority of the 3600 bilateral tax conventions entered into by OECD and non OECD countries and may now be considered the international norm for tax cooperation.
1. exchange of information on request where it is
"foreseeably relevant" to the administration and
enforcement of the domestic laws of the treaty partner;
2. no restrictions on exchange caused by bank secrecy or domestic tax interest requirements;
3. availability of reliable information and powers to obtain it;
4. respect for taxpayers rights; and
5. strict confidentiality of information exchanged (together referred to as the OECD International Tax Standard). (3)
"Exchange of information" envisages the creation of taxation information exchange agreements (TIEA) between countries, under which countries agree to exchange information for tax purposes. Agreements may be bilateral or multilateral.
The OECD have suggested that there is no "hard and fast" line as to whether the OECD Tax Information Standard has been implemented, however, a good indicator of progress is whether a jurisdiction has signed at least 12 TIEAs that meet the OECD Tax Information Standard. This initial threshold will be reviewed to take account of:
1. the jurisdictions with which the agreements have been signed (a tax haven which has 12 agreements with other tax havens would not pass the threshold);
2. be willing to continue to enter into TIEAs; and
3. effectively implement and administer the relevant TIEAs. (4)
The OECD indicates that more than 40 TIEAs have been signed or announced since last November and that since 2000, over 100 TIEAs have been signed. (5) It is likely that many more will be signed in the near future as countries seek inclusion on the OECD white list.
The Current State of Play
Although there has been a steady clamp down on tax haven activity for decades, it seems that the sustained efforts of the Major Players in recent times are yielding significant results. Current events across the globe highlight that the coordinated and sustained attack of the Major Players is putting increased pressure on both their own evasive taxpayers and on the tax haven jurisdictions that are regarded as facilitating them. The seemingly endless game of cat and mouse seems to be shifting largely to the "cats" advantage.
The Major Players have recently increased their hunt for tax
evaders in jurisdictions that have to date been protected from the
"name and shame" tag of tax havens. Smaller and less
politically powerful jurisdictions, including most Pacific Island
jurisdictions, have long been viewed with contempt for their
offshore financial services (6), other larger principalities such
as Liechtenstein and Switzerland, however, have previously escaped
This has changed in recent times. In 2008, Germany paid an informant for records apparently purloined from a Liechtenstein bank, in an effort to apprehend German tax cheats. In 2009, the United States demanded that the juggernaut Swiss bank UBS surrender the names of 52,000 account holders suspected of tax evasion, a case that threatens the foundations of Swiss banking secrecy (See "The United States of America v. UBS AG").
The Obama Administration is working for the enactment of new legislation, the Stop Tax Haven Abuse Act – that is designed to better enable US authorities to obtain information about offshore trusts and accounts used by Americans.
In Australia, the Australian Tax Office through Project Wickenby, is persistently pursuing Australian tax evaders who deploy tax haven-based vehicles.
All over the world in the next few years many new laws will be enacted seeking to curtail the use of tax havens and many cases prosecuted against persons regarded as tax evaders.
As transparency and TIEAs become the new focal point for eliminating tax evasion and security threats , it is almost inevitable that certain jurisdictions will not be able to keep up with the demands of implementing internationally adequate regimes as required by the Major Players.
One can safely say that efforts to curtail certain aspects of the use of tax havens will continue to be a permanent feature of the international political landscape. Clearly, that does not mean the world is or will be free from tax havens. Rather, it will merely mean that there has been substantial progress made in at least some areas, which in the current state of play, will mean transparency and the exchange of information.
(1) Tournier v National Provincial and Union Bank of
England  1 KB 461
(2) F.D.C Co Ltd and Others v The Chase Manhattan Bank, N.A. (1990) H.K.L.R. 277
(3) "Overview of the OECD's Work on Countering International Tax Evasion", OECD, 19 August 2009, page 2 http://www.oecd.org/dataoecd/32/45/42356522.pdf.
(4) Ibid. page 10 (5) Ibid. page 2
(6) Nauru is a good example. It received widespread international criticism for its offshore financial activities throughout the 1990s culminating in being blacklisted by both the OECD and the FATF.
(7) The G20 Summit in London in April 2009 emphasised the OECD's position of wanting to eradicate unco-operative financial centres. Flying into London, a belligerent President Sarkozy stated: "We [the G20] have said very clearly that we want lists of financial centres that do not co-operate with OECD criteria, and to draw the consequences of that'." P. Aldrick, "G20 summit: Sun setting on tax havens." The Telegraph, 2 April, 2009.
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