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Montserrat Plans To Strengthen Tax Transparency Framework

by Amanda Banks,, London

28 June 2012

The government of the Caribbean territory of Montserrat has announced that it is to revise several of the nation's laws to address deficiencies identified in the Organization for Economic Cooperation and Development's (OECD) Phase One review of the island's frameworks for tax transparency and information exchange for tax purposes.

The Phase One review, undertaken by the OECD's Global Forum on Tax Transparency and Information Exchange in Tax Matters, in particular assessed whether the island has introduced the necessary legislation and regulatory frameworks to transparently exchange information with other nations' competent authorities, as part of the Organization's global initiative to tackle fiscal crime.

The government reported that a number of issues had in arisen in relation to the jurisdiction's companies legislation. Listing areas for improvement, the OECD review said: "First, the Companies Act differentiates between shareholders and members, the difference being that only the latter are registered with the company, and Montserrat should ensure that full ownership information on Montserratian companies is available, whether the owner is qualified as [a] member or shareholder. Second, companies incorporated outside Montserrat but with a place of effective management in Montserrat (and thus tax residents there) are not expressly required to keep ownership information."

"Finally, regarding the duty to retain ownership and identity, Montserrat’s laws do not provide for adequate records in respect of accounts in all cases, specifically for Limited Liability Companies. In addition, Montserrat’s laws do not provide for the retention of underlying documentation or retention of documents for a minimum of five years for any entity. Therefore, this report recommends that Montserrat amend its laws to comply with the international standard in this regard."

Providing a commitment that the territory would make the necessary changes, the island's Financial Secretary John Skerrit announced on June 26, 2012, that the government is "preparing to make the necessary amendments to the relevant legislation ahead of the next reporting period in November”.

Despite weaknesses in Monserrat's frameworks, the territory has been allowed to progress to the Phase Two review which will assess whether the territory effectively exchanges relevant tax information in practice. Amendments to the island's legislation to satisfy the concerns raised in the Phase One report will also be examined. It is expected that the OECD will undertake the Phase Two review of Montserrat in the second half of 2013.

Montserrat has barely satisfied the benchmark, set by the OECD, that territories should conclude at least twelve agreements that incorporate internationally-agreed standards. Nevertheless, having signed a total of thirteen agreements, the jurisdiction is placed among territories that have substantially-implemented internationally-agreed standard in the area of transparency and tax information exchange, in the OECD's Progress Report.

Bilateral pacts signed by Montserrat include comprehensive Double Taxation Conventions with Switzerland and the United Kingdom, and eleven Tax Information Exchange Agreements, signed with Australia, Belgium, Denmark, the Faroe Islands, Finland, Germany, Greenland, Iceland, the Netherlands, Norway, and Sweden.

TAGS: tax | offshore confidentiality | tax information exchange agreement (TIEA) | double tax agreement (DTA) | Montserrat | law | international financial centres (IFC) | Organisation for Economic Co-operation and Development (OECD) | offshore | agreements | legislation | standards

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