The governments of Jersey and Guernsey have issued a Memorandum which describes how they see their current situation vis-a-vis the OECD's 'Unfair Tax Competition' initiative.
The story so far is that both jurisdictions were included on the infamous OECD 'blacklist' in July 2000 which included 35 'tax havens' the organisation deemed to be offering unfair competition to its high-taxing member states. Some of the 35, not including Jersey and Guernsey, gave the commitments required by the OECD, which nominally have to be fulfilled by 2005. But strong resistance from many of the 35, crucially assisted by the US when the post-Clinton administration did an about-turn on many planks of the OECD platform, meant that the initiative lost much of its force.
Now, unless the US changes tack after the recent terrorist attacks, the OECD is going to be able to ask only that the listed jurisdictions should implement information-sharing under mutual assistance treaties, and should ensure transparency of ownership for offshore entities. Jersey and Guernsey say that they already fulfil most of the required conditions, and are more or less happy to go along with the remainder providing that other countries do as well - meaning both their offshore competitors and also the OECD member states themselves.
The OECD initiative is currently becalmed while Spain refuses to sanction publication of the OECD's July 2001 Progress Report as part of its campaign to regain from the UK the sovereignty of Gibraltar it lost nearly 300 years ago. Until the last two weeks it was fairly clear that the OECD had accepted the US-led constraints on its agenda, but it now remains to be seen whether the organisation will be able to claw back some of the ground it has lost. The next version of the 'blacklist', which will be of those jurisdictions that have been 'unco-operative' with the OECD, will be published in November, if Spain allows it, and Jersey and Guernsey are hoping that they will not be included since they largely conform with the OECD's cut-down criteria.
The Memorandum notes that the removal, or substantial dismantling, of ring-fenced tax regimes has been dropped as a criterion for ‘listing’. To avoid being listed as ‘unco-operative’, if and when the OECD’s list appears, the OECD now says that a jurisdiction need only make commitments in respect of effective exchange of information and transparency. Those jurisdictions that have already given a commitment to remove ‘ring-fencing’ have been given the opportunity to review their earlier commitments and any consequent implementation plan that may have been agreed with the OECD.
'The policy change that has taken place over the last couple of months,' says the Memorandum, 'is of considerable significance for Guernsey and Jersey. The Authorities in both Islands have been heartened by the impact of the new US position and the way other countries have fallen into line behind it. The change does not, however, mean that the Islands can sit back and relax - far from it. The exchange of information and transparency agendas are still challenging, and we can perhaps expect them to be prosecuted now with additional vigour.'
The Memorandum notes that even the consensus the OECD was able to achieve in July was not joined by Belgium, Portugal, Switzerland or Luxembourg. 'Four European abstentions plus the carefully delineated US position plus an unpublished report plus a couple of months silence obviously need to be factored into our assessment of the next steps,' says the Memorandum meaningfully.
The islands make it clear that they will accept what amounts to an existing international consensus on information exchange as regards criminal matters, but are more hesitant when it comes to 'civil' investigations. 'Guernsey and Jersey,' they say, 'will be content to agree to such international standards when they are eventually agreed, on the assumption that the Islands have been invited to participate in a satisfactory international forum which has as its aim the development of such standards and their global adoption.'
The Memorandum describes in detail the extent to which the islands would
be prepared to circumscribe their historical standards of privacy, and
conclude that they are offering enough not to be included on any reissued
list:
'Our considered view at this stage is that the position outlined . . .
. . . . should be viewed by the OECD as a credible way forward which gives
assurance that Guernsey and Jersey are not in any sense ‘unco-operative’
and thus should not be ‘listed’ as such on 30 November or at
any other date. We believe that the outcome of this will be satisfactory.'
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