Originally published on 28 February 2002
It was announced on 27 February 2002 that both Jersey and Guernsey have entered into identical agreements with the OECD in relation to the OECD’s harmful tax practices initiative¹, in consequence of which neither Island will be listed by the OECD as an uncooperative tax haven.
The agreements commit the Islands to adopt the OECD’s principles of exchange of information and transparency with the operation of legal entities, both in a general political commitment and in tax information exchange agreements that may be negotiated with individual jurisdictions. For its part, the OECD appears to have acknowledged the importance of maintaining a ‘level playing field’ between international financial services centres, a point that is emphasised within the commitment letters.
The letters note that the two Islands have an extremely good track record of compliance with international standards for, and of international co-operation in, financial regulation and in the fight against all crimes money laundering, and this has been recognised by the FATF, the FSF, and by individual countries. In respect of exchange of information, Jersey already exchanges information with respect to criminal tax matters, which includes some matters that in some jurisdictions may be regarded as civil tax issues.
The agreements are based on the assumption that if other jurisdictions, including OECD member states, fail to adopt equivalent commitments or to satisfy the standards of the 1998 report, they will be subject to the "common framework of defensive measures" to which the OECD has referred in its publications.
It has been widely reported that the Jersey representatives in the negotiations with the OECD took a strong, perhaps even aggressive approach so as to protect the economic interests of the Island. However, there was strong support from the Island’s finance industry for the manner in which the negotiations were conducted and a firm belief that the OECD was at least as keen for the Islands to be included within its initiative, as the Islands were not to be classified as uncooperative. In consequence, the general view is that the agreements reached by the Channel Islands with the OECD are much tighter and perhaps more favourable than those that have been entered into by other jurisdictions. There doesn’t appear to be any truth to the reports in some media that the UK Treasury put pressure on the Channel Island authorities to conclude these agreements; however, there is no doubt that the UK government will have welcomed the satisfactory conclusion to these negotiations. One Treasury official is reported to have noted that the commitments are "seen as important to the credibility of British efforts to help lead worldwide efforts to improve financial supervision".
Some specific issues included within Jersey's general political commitment to the OECD, which will also serve as the basis for bilateral negotiations on tax information exchange agreements, are to:
A. AS REGARDS INFORMATION EXCHANGE
- maintain legal mechanisms permitting information to be given to tax authorities in other jurisdictions, upon specific request for the investigation and prosecution of criminal tax matters. Such information will be provided on a reciprocal basis and in accordance with the legal procedures for handling such requests, such procedures to be set out in tax information exchange, or mutual legal assistance, agreements to be negotiated with individual jurisdictions;
- maintain administrative arrangements and provide sufficient resources to ensure effective exchange of information;
- provide information whether or not the conduct being investigated would constitute a crime under Jersey laws, if it occurred in Jersey;
- provide to tax authorities upon specific request, and in accordance with tax information exchange agreements to be negotiated with individual countries, information that may be relevant to civil tax matters;
- allow (subject to tax information exchange agreements) information to be exchanged through administrative means with tax authorities (including courts and duly authorised administrative bodies);
- negotiate tax information exchange agreements, subject to there being full reciprocity (i.e. the other jurisdiction has the same or equivalent provisions for the relevant exchange of information) including adequate protection against the unauthorised disclosure of information by the receiving jurisdiction and taking fully into account privacy obligations arising out of Article 17 of the International Covenant on Civil and Political Rights, Article 8 of the European Convention of Human Rights and similar obligations;
B. AS REGARDS TRANSPARENCY
- "ensure that information on beneficial ownership of companies, partnerships and other legal entities established in Jersey, including managers of collective investment funds, and trustees and beneficiaries of trusts, is available to its tax or regulatory authorities. This will include companies which, being incorporated elsewhere, have a place of business in the Island;
- "ensure that the Jersey authorities have access to bank information relevant to tax matters of both resident and non-resident business enterprises, individuals and other entities, including trusts;
- "require that accounts are kept by companies, partnerships, trusts and other legal entities established in Jersey or having a place of business in the Island. The requirement to audit accounts will follow accepted international standards and accounts will be required to be filed in support of tax returns; and
- "allow for the information gathered in accordance with the preceding three paragraphs to be subject to exchange in accordance with negotiated tax information exchange agreements.
"The full text of the commitment letters can be found on the OECD’s web-site at http://www.oecd.org/EN/document/0,,EN-document-103-nodirectorate-no-21-4393-22,FF.html.
"It should be noted that the agreements do not provide for automatic or spontaneous exchange of information; the agreement simply provides that Jersey will maintain in place mechanisms that allow information to be provided to tax authorities upon specific request for the investigation and prosecution of civil and criminal tax actions.
"The agreement contemplates that Jersey will now participate on an equal basis with other jurisdictions in discussions in the Global Forum of OECD member countries and representative non-member countries and jurisdictions on the design of internationally accepted standards for the implementation of information exchange agreements and transparency of operations."
The content of this article does not constitute legal advice and should not be relied on in that way. Specific advice should be sought about your specific circumstances.