tax & jurisdiction
A leading tax expert in London has warned that the Organisation for Economic Co-Operation and Development's (OECD) programme for tax information exchange is in jeopardy.
However, he has advised offshore centres to continue to co-operating with the organisation's requirements, because in the end, the conflicts which exist between the EU's requirements under the Savings Tax Directive and the OECD's requirements are bound to come to a head.
Although the OECD and the European Union are both trying to achieve the same end - more tax information exchange - their separate approach to impose rules has created conflicts, to the advantage of offshore centres who have for some time been trying to please both organisations.
"Emerging plans for tax information exchange have been thrown is disarray by extraordinary developments in the recent negotiations over the EU Savings Tax Directive," said Richard Hay, international tax partner at Stikeman Elliott in London.
"Despite a commitment in principle to information exchange as the ultimate objective of EU plans for policing tax compliance, Swiss insistence on preserving banking secrecy has led to a temporary (and possibly permanent) exemption from information exchange obligations being granted to Switzerland, Luxembourg, Austria and Belgium by EU member states," he said.
He added, in a report published by Stikeman Elliot, A Level Playing Field for Tax Information Exchange?: "All states concerned (that is, those granting and those giving an exemption from information exchange) are members of the OECD, yet the OECD has threatened draconian sanctions for non-member jurisdictions which are not committed to information exchange in its own parallel programme.
"OECD assurances that it could ensure adherence to similar standards by its own member states are now in doubt, and the threatened sanctions for non-member jurisdictions are now inconceivable."
Hay goes on to say that considering some OECD members have evident reservations about tax information ex- change, it is tempting for small offshore jurisdictions to avoid making similar commitments to tax information exchange.
"However, the OECD's project for information exchange is too important to fail," said Hay. "Greater information exchange is inevitable in an interdependent world. Small jurisdictions which are insensitive to the need to assist the larger countries (on which their ability to do business depends) risk further confrontations ahead."
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