BVI Accused Of Stalling Tax Agreement With Australia

by Mary Swire, Tax-News.com, Hong Kong

02 January 2006

A Tax Information Exchange Agreement (TIEA) between Australia and the British Virgin Islands has reportedly been derailed at the last minute because the Caribbean jurisdiction is holding out for special concessions from Canberra as an inducement to sign the agreement.

The TIEA with the BVI would be the second such agreement that Australia has signed in recent weeks, as part of a major crackdown by the Howard government on offshore tax evasion and money laundering. Bermudian Finance Minister Paula Cox and Australian Treasurer Peter Costello signed an information exchange agreement in Washington last year.

However, according to a report from the Sydney Morning Herald, Australian officials believe the BVI government is holding out for special consideration for its banking and shipping services, or to gain Australian technical assistance.

Nonetheless, one Australian official was quoted as saying that Canberra was "not going to buy an agreement".

The Australian authorities have recently escalated their enforcement activities involving offshore transactions, after it became apparent that a substantial amount of funds flowing in and out of the country were being transmitted through a number of offshore territories. According to Australia's Deputy Commissioner of Taxation, Paul Duffus, an estimated A$5 billion (US$3.7 billion) flows from Australia to these jurisdictions each year, and the government suspects that much of this money is not flowing through these countries for entirely legitimate reasons.

In a bid to staunch this flow of money and make it 'easier for tax evaders and money launderers to be identified', Duffus informed the Senate Economics Legislative Committee recently that the Australian Tax Office (ATO) has been conducting talks with Anguilla, Antigua & Barbuda, the British Virgin Islands, the Cayman Islands, Grenada, Guernsey, Jersey, the Isle of Man and the Netherlands Antilles with a view to completing tax information exchange agreements.

It is also believed that Canberra is keen to sign TIEAs with South Pacific territories, including Samoa, Vanuatu and the Cook Islands, although it has yet to launch formal talks with these governments.

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