The International Cooperation (Tax Information Exchange Agreements) Act 2005, introduced into the Assembly by Finance Minister Paula Cox last week, is umbrella legislation that will give effect to Tax Information Exchange Agreements with countries in the OECD and the European Union.

The bill, which was passed in committee and sent to the Senate, comes hot on the heels of Bermuda's sealing of a TIEA with Australia, which was signed by Ms Cox and Australian Treasurer Peter Costello in Washington, DC in November. The agreement marks the first treaty that Bermuda has entered into following a commitment to ban harmful tax practices five years ago. Bermuda's first TIEA was signed with the United States in 1988.

The Australian authorities have recently escalated their enforcement activities involving offshore transactions, and had been keen to initiate a tax information exchange deal with Bermuda after it became apparent that a significant proportion of funds flowing in and out of the country were being transmitted through offshore territories.

"I understand that both Australia and Bermuda are committed to ensure that their financial sectors are not used for money laundering or the financing of terrorism," Ms Cox quoted OECD Chairman on Fiscal Affairs Bill McCloskey as stating.

"Bermuda has already has a strong track-record in this respect," she added.

According to Cox, tax exchange agreements would not only distance Bermuda from its old "tax haven" label, but also boost trade in financial services and improve commercial relations.

"As such it is important to our national economic interest that Bermuda directly negotiates with such countries," she stated.

Ms Cox revealed that Bermuda was negotiating with the UK towards the completion of an updated TIEA and was also in diplomatic contact with Mexico.