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Isle Of Man: Council Of Ministers Proposes OECD Commitments

Robert Lee,, London

04 December 2000

Last week reported that the Isle of Man was told by OECD Deputy Secretary General Seiichi Kondo that it must make more changes to its tax regime before it can satisfy the OECD and be removed from the organisation's blacklist of un-cooperative tax havens. He had praised the Isle of Man, saying the island had done well, but the regulations governing transparency, exempt companies and the exchange of information were issues that had yet to be dealt with. Now the Manx government has come up with a proposed schedule of OECD commitments aimed at ensuring the Paris-based organisation does not include the Isle of Man on its revised list of tax havens, due to be published in July 2001.

By July next year, jurisdictions targeted by the OECD will have had twelve months in which to get their houses in order, or at least to the liking of the OECD. The Council of Ministers' advance commitments will be made to the OECD if they are approved by the island's parliament, Tynwald, at its December sitting. If accepted by the OECD, they will remove the threat of economic sanctions and, says the goverment, form the basis for further detailed negotiation.

The commitments deal with the precise "deficiencies" noted by the OECD Deputy Secretary General. They cover exchange of information with other tax authorities (instead of the introduction of banking secrecy laws), transparency and preferential tax regimes, and are in line with the Treasury tax strategy approved by Tynwald in October this year. The changes will ensure information on the beneficial ownership of companies is available to regulatory authorities; international companies in their current form, non-resident companies and share warrants to the bearer will be abolished, and restrictions on the ability of Isle of Man entities to do business on preferential tax terms will be removed. Changes would be phased over the next five years.

The Council of Ministers has stressed that its offer to make changes must be counter-balanced by guarantees from the OECD that the Isle of Man will not make next year's blacklist and that sufficient equivalent commitments are made by other jurisdictions including OECD members.

The Manx government has been negotiating with the OECD since the organisation published its provisional list of 35 so-called "harmful" tax havens ' in June 2000. Representatives of the Isle of Man's financial services sector, consulted by the government, have been unanimous in their desire to see the UK dependency excluded from the final tally. Hence the commitments of last week, which Chief Minister Donald Gelling categorically denies signify the Manx government giving in to external pressure. Mr Gelling said a working party with the financial sector has been created to discuss alternative vehicles to exempt companies and the impact of the commitments in the Isle of Man.


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