Guernsey: OECD: Implications For Guernsey

Last Updated: 27 February 2001
Article by Jonathan Hooley

Appendix 1 sets out a summary of the principal international initiatives affecting Guernsey. Of these, attention is currently focused on the OECD initiative, partly because it is the most recent body to have reported, but largely because it represents unfinished business.


The Organisation for Economic Co-operation and Development (OECD) was established in 1960 as a co-operative organisation to promote policies that would 'achieve highest levels of sustainable economic growth' and 'contribute to the expansion of world trade '. Its membership currently comprises some 29 different countries, including all G7 countries and all member states of the EU. As such, it does not have any legislative or governmental function and is merely an advisory body. However, its pronouncements carry substantial authority and it is likely that many countries, including non-members, would take careful note of any recommendations made by it. Tax issues are the responsibility of the Committee on Fiscal Affairs which, amongst other things, has been instrumental in drafting and promoting a standard double tax agreement, which has formed the basis of many of the bilateral double tax agreements that are currently in existence.

OECD Review Of Harmful Tax Competition

The process of reviewing offshore financial centres commenced in May 1996 as part of a wider exercise, whereby the OECD was asked to 'develop measures to counter the distorting effects of harmful tax competition on investment and financing decisions and the consequences for national tax bases', and report back in 1998. The Committee on Fiscal Affairs created a body known as the 'Special Sessions on Tax Competition;, under the joint chairmanship of representatives from France and Japan, which was responsible for the production of a report in early 1998. Although the report produced by this body was approved by the OECD council, it did not receive the OECD's unanimous approval. Both Luxembourg and Switzerland abstained and issued their own statements on the report's conclusions. This report led to the establishment of a Forum charged with the review of two matters. Firstly, preferential tax regimes offered by the OECD member countries, and secondly, the identification of 'tax havens'. The Forum published its initial report on 26 June 2000.

OECD Forum Report

The Report of the OECD Forum, published on 26 June 2000, contains two lists. Firstly, a list of the preferential regimes available in OECD member countries that are regarded as potentially harmful, and secondly, a list of jurisdictions that have been classified by the OECD as tax havens that had not, by the time the report was produced, given a commitment to co-operate with the OECD to eliminate what the OECD regard as harmful tax practices. As was expected, Guernsey, in common with Jersey and the Isle of Man, appears on the second of these two lists. The former list is of no specific relevance to Guernsey. However, it is worthy of note to those in the insurance industry, that the lists include preferential regimes applying to insurance in eight OECD member countries, ie. Austria, Belgium, Finland, Italy, Ireland, Portugal, Luxembourg and Sweden, with the result that the 'harmful' features of these regimes will have to be removed by April 2003. The second list is less specific. It does not identify the specific tax measures that are regarded as being harmful. Quite how the OECD arrived at this list is not clear. The published criteria are not capable of objective re-evaluation.

What Does The OECD Want?

Precisely what the OECD expects is difficult to ascertain. In their report of 26 June 2000, the OECD Forum made much of the fact that six jurisdictions - Bermuda, The Cayman Islands, Cyprus, Malta, Mauritius and San Marino - had made a political commitment to 'eliminate their harmful tax practices and to comply with the principles of the 1998 report', and even published the letters of commitment on the OECD website. However, the letters published did not include the all important annexes to these letters, listing the specific commitments that have been given by those jurisdictions. One of the key matters which the OECD are likely to press for is a commitment to exchange information. However, this is a far from straightforward matter which raises a number of issues, including:

  1. whether the information will merely need to be supplied on request or spontaneously;
  2. whether it covers civil as well as criminal matters;
  3. whether it would be supplied with the conclusion of a comprehensive double tax agreement or merely an agreement to exchange tax information.

The other aspect likely to be of interest to the OECD is a 'ring-fenced' tax regime. The Isle of Man pre-empted the publication of the OECD report with a proposal to levy zero rates of tax on certain types of business, including insurance and shipping, without restricting this benefit to businesses owned from outside the Isle of Man. The equivalent in Guernsey would be to remove the conditions that companies have to satisfy in seeking exempt or international status, whilst safeguarding the potential loss of tax from Guernsey resident shareholders by enhanced anti-avoidance measures. However, the essential point is whether this would be acceptable to the OECD. At this stage this is difficult to predict.

Appendix 1

International Initiatives Affecting Guernsey

The Edwards Report

An investigation by the UK Government into the financial regulation of the Crown Dependencies Report, published in November 1998. The Report contained some recommendations concerning legislative approach and regulation. However, Guernsey's reputation for stability, integrity, professionalism, competence and good regulation was endorsed by the Report. The Island's regulatory systems, judicial and prosecution systems and co-operation with other jurisdictions were praised.

Financial Stability Forum

The repot by the Financial Stability Forum considered the implications of offshore financial centres (OFC's) for global financial stability, ranking jurisdictions into three categories based on their perceived quality of supervision and degree of co-operation. The report was based on a survey of all OFC's into their standards for supervision, co-operation and information sharing. The report categorised OFC's into three groups. Guernsey was placed in the top group.

Financial Action Task Force

The exploitation by criminals of weaknesses in jurisdictions, enabling the continuation of money-laundering activities, was investigated by the Financial Action Task Force (FATF). All countries and territories which are part of the global financial system have been urged to change any rules or practices which impede the fight against money-laundering. Those with serious systemic problems were identified in the report by the FATF, which sought to identify those countries that are non-co-operative in the 'fight against money-laundering', or more specifically, who have rules and practices which impede against international co-operation against money-laundering. Fifteen jurisdictions, including a number of recognised OFC's, were names as having non-co-operative practices. The list did not include Guernsey.

EU Code Of Conduct

In December 1997 the ECOFIN Council of the EU member states decided to establish a committee under the Chairmanship of Dawn Primarolo, a UK Government Treasury Minister, to consider fiarness in taxation. This committee was charged with reviewing preferential tax regimes, ie. regimes that provide a lower rate of tax than that generally applicable in the jurisdiction concerned, in the European member states and their dependent territories. The work of the European Code of Conduct was similar, but not identical, to that of the OECD. Firstly, it encompassed all aspects of taxation, not just those related to financial transactions. Secondly, it sought to identify preferential tax regimes, rather than characterise a jurisdiction as a whole as a tax haven or not a tax haven. Adoption of the Code of Conduct Group's work was tied to agreement on two other EU tax measures, including the proposed Saving Directive, and was therefore delayed. However, the report of the EU Code of Conduct Group was finally accepted by the heads of the EU member states at their summit on 20 June 2000. The final list, produced by the Code of Conduct Group, listed five measures applicable to Guernsey as being potentially harmful:

  1. exempt companies
  2. international loan business;
  3. international companies;
  4. offshore insurance companies;
  5. insurance companies.

The latter measure refers to the little used concession available in Guernsey, whereby qualifying offshore insurers, who have elected to pay tax at 20% on their income, are entitled to defer their liability by reference to a claims related formula.


A study undertaken by a Forum established by the Organisation for Economic Co-operation and Development (OECD) intended firstly to identify potentially harmful preferential regimes operated by OECD member countries and to identify jurisdictions regarded as tax havens. And secondly, to recommend actions to be taken against the jurisdictions concerned. The Forum produced its report on 26 June 2000, listing 35 jurisdictions that were found to meet the tax haven criteria set by the OECD. The listing does not include the names of the jurisdictions which have already made a political commitment to eliminate their harmful practices. Guernsey was included on this list. A further list, the 'OECD List of Unco-operative Tax Havens' is due to be completed by 31 July 2001. The OECD Committee on Fiscal Affairs has recommended that OECD member countries adopt a general framework which will facilitate the ability of countries to take defensive measures against unco-operative jurisdictions. It is proposed that once the Forum finalises its recommendations , defensive measures are implemented against the jurisdictions appearing on the list of 'Unco-operative Tax Havens' as of 31 July 2001.

Appendix 2

Key Factors In Identifying Tax Havens For the Purposes Of The OECD Report

  1. No Or Only Nominal Taxes
  2. No or only nominal taxation on the relevant income is the starting point to classify a jurisdiction as a tax haven.

  3. Lack Of Effective Exchange Of Information
  4. Tax havens typically have in place laws or administrative practices under which businesses and individuals can benefit from strict secrecy rules and other protections against scrutiny by tax authorities, thereby preventing the effective exchanges of information on taxpayers benefiting from the low tax jurisdiction.

  5. Lack Of Transparency
  6. A lack of transparency in the operation of the legislative, legal or administrative provisions is another factor in identifying tax havens.

  7. No Substantial Activities

The absence of a requirement that the activity be substantial is important, since it would suggest that a jurisdiction may be attempting to attract investment or transactions that are purely tax driven.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.