Following Thursday's meeting of the G-20 leaders, the OECD published a report on 82 financial centres assessing their progress towards the "internationally agreed tax standard". This standard requires exchange of information on request in all tax matters for the purposes of administering and enforcing domestic tax law.

The OECD progress report recognises the strong position of the Cayman Islands, the British Virgin Islands and Jersey as financial centres committed to meeting the highest international standards.

In its report, the OECD divided the 82 jurisdictions into three categories:

1. A "white list" of jurisdictions that have substantially implemented the internationally agreed tax standard. In addition to most of the larger economic powers, this list includes Jersey, which recently signed new tax information exchange agreements with France and Ireland.

Walkers has had a full service Jersey office since 2006, providing advice on all aspects of Jersey law with particular emphasis on matters of corporate and international finance law. Jersey's position on the "white list" reaffirms that Jersey has a model tax regime which meets the highest standards of transparency and regulation. This endorsement will bolster Jersey's reputation as a hub for investment funds and structured finance vehicles.

Click here to see statement from Jersey Finance.

2. A "grey list" of jurisdictions that have committed to the internationally agreed tax standard, but are said to have not yet substantially implemented it. Most of the familiar offshore financial centres appear on this list, including Luxembourg, Switzerland, Singapore, Cayman and the BVI.

Of the "grey list" jurisdictions, Cayman has the highest number of bilateral tax information exchange agreements, which we understand is the principal yardstick by which the jurisdictions' progress in tax matters has been measured. In addition, in December 2008 Cayman enacted an innovative unilateral tax information exchange mechanism to supplement its bilateral agreement negotiations. A footnote to the list states that this legislation is being reviewed by the OECD, and the Director of the OECD's Centre for Tax Policy and Administration commented favourably on the unilateral mechanism immediately prior to the G-20 meeting, saying "I appreciate the fact the Cayman Islands has sought to simplify the means by which to broaden its information exchange relationships. The Cayman Islands is setting a good example." We therefore expect that Cayman will be removed from the "grey list" at the earliest opportunity and added to the "white list".

Click here to see statement from the Cayman Islands Government.

The BVI too has made excellent progress in its tax information exchange negotiations, concluding agreements with the United States, the United Kingdom and Australia. We understand that negotiations with the seven Nordic countries, among others, are also at an advanced stage. Once the relevant tax information exchange agreements have been signed, it is expected that the BVI will also be transferred from the "grey list" to the "white list".

Click here to see statement from the British Virgin Islands Government.

The OECD did not specify what the consequences will be, if any, for the "grey list" jurisdictions. It is likely that all of the jurisdictions' progress in tax information exchange matters will be assessed over the coming months, and those that are deemed to have made insufficient strides may be subject to certain sanctions in due course. No date has been announced by the OECD for making such determination. As noted above, both Cayman and the BVI have made significant progress to date, and further progress is anticipated over the coming months.

It therefore seems to us to be inconceivable that any adverse measures will be applied to Cayman or the BVI. In addition, it should be noted that the sophisticated international finance transactions for which Cayman, the BVI and Jersey are used are not what this initiative seeks to target, namely tax evasion. Cayman, the BVI and Jersey are consistent in their condemnation of tax evasion.

3. A "black list" of jurisdictions that have not committed to the internationally agreed tax standard. There are only four jurisdictions on this list: Costa Rica, Malaysia (Labuan), the Philippines and Uruguay.

Walkers is proud to advise on the laws of Cayman, the BVI and Jersey, all of which operate to the highest professional standards. The achievements of these jurisdictions in the areas of exchange of tax information and transparency, anti-money laundering and financial regulation stand up to the closest scrutiny. We are confident that their progress in tax information exchange matters will continue to be applauded. In turn, we will welcome those G-20 and OECD members which currently have deficient anti-money laundering regimes bringing their regimes up to the accepted international standards long applied by Cayman, the BVI and Jersey.

Cayman, the BVI and Jersey play a crucial role in facilitating global capital flows, and we look forward to continuing to assist our clients with the cross-border international transactions and investment products that are so critical for a sustainable global recovery.

Should you have any questions about the OECD progress report, or any other offshore or cross-border issues, please call your usual contact at Walkers or one of the partners listed below.

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