An Isle of Man Treasury working party will investigate whether automatic exchange of tax information should be introduced on the island. Currently tax information is shared only upon request.
The Isle of Man has signed 14 Tax Information Exchange Agreements (TIEAs), securing a place on the OECD's "white list" of cooperative jurisdictions. However, reports suggest Treasury minister Allan Bell believes there are signs the international agenda, including that of the European Union, is moving towards automatic exchange.
Currently non-residents can pay a withholding tax of 20% on their savings interest which is remitted back to their home country, or choose to exchange tax information. The withholding tax will rocket to 35% in July 2011.
Bell says: "That's quite a big jump and there is a debate of whether we need to continue with a withholding tax of 35%, which is quite punitive, or move towards the automatic exchange of tax information."
He says practical implications of the large volume of paperwork generated should be considered, but the mechanisms already exist throughout Europe.
"In the short term it could perhaps cause us some administrative difficulties. But my own belief is that the time has come to review our position."
The present requesting regime does not allow countries to make 'fishing' expeditions and trawl for information about residents. Information must be requested about an individual accompanied by reasonable grounds to believe that person evading tax.
Bell recently discussed automatic exchange with his UK counterpart, financial secretary to the Treasury, Stephen Timms. The business community had concerns when TIEAs were first introduced, says Bell.
"But their fears were unfounded and it's not made any noticeable difference to the business we do.
"Similarly, I'm sure there will be concerns within the finance sector that automatic exchange is a step too far. We have to listen to their concerns and we have to consider what impact such a measure might have, particularly at this fragile time," he says.
Meanwhile, the Isle of Man has signed a double taxation agreement (DTA) with Estonia.
The DTA agreement is designed to remove double taxation obstacles to the development of economic relations, facilitating the movement of capital between countries.
Based on the model published by the OECD, the DTA will also act to prevent tax evasion and deliver tax transparency and exchange of information.
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