28/10/2013: Back in the News: Double-Irish (non)Tax Haven

Starting the week on the right footing... Ireland's tax regime back in the news:

• Bloomberg inforgraphic showing clearly the disconnect between our fabulously 'active' corporate profitability and our anaemically limp jobs creation amongst Ireland-based US MNCs: http://www.bloomberg.com/infographics/2013-10-28/u-s-profits-in-ireland-pile-up.html
• More Bloomberg reporting: an extensive profiling of the lead tax specialist behind Ireland's infamous double-Irish: http://www.bloomberg.com/news/2013-10-28/man-making-ireland-tax-avoidance-hub-globally-proves-local-hero.html

And note: this is not tax haven, although it is, according to the specialist behind it, going away... cause it is not a tax haven, of course...

You can track series of articles featuring Irish tax regime in international media starting from this link:

http://www.fergco.co/2013/10/24102013-irish-tax-regime-hits-news.html

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13/9/2013: Another month, another 'look into' Irish tax rules

The regular readers of this blog are aware that I try to track the more important news items concerning Ireland's corporate tax policies. The links to these stories can be successively follows from here: http://www.fergco.co/2013/08/1982013-tax-haven-ireland-in-2009-news.html

Two more items from today are worth listing in addition to the above:

1. An article from the Irish Independent (http://www.independent.ie/business/irish/state-to-lift-lid-on-us-firms-secret-tax-rulings-29575810.html). Couple of selective quotes: "Details of how multinational companies' tiny tax bills are calculated are to be revealed by the State for the first time." And per usual disclosure that the Stockholm Syndrome patients must have: "Irish authorities have always insisted that there are no special tax deals for companies. Under Irish law, all businesses are supposed to be subject to the same laws and tax rates." Alas, as article notes: "This is the first time information about how Ireland taxes big corporations has ever been shared outside of the Revenue Commissioners and the companies themselves... Tax rulings are so confidential that even the Department of Finance is never given details by Revenue of individual cases." Ok, nothing to see there, folks, it's just so we like secrets, we've just decided to have our own Area 51... cause we like it that way, not cause there's any smoking guns or something...
2. And so we don't really have to worry about out tax policies, as the Government says we shouldn't, here's a article from the Irish Times (http://www.irishtimes.com/business/economy/eu-finance-ministers-put-state-s-tax-regime-in-spotlight-1.1525893). More selective quotes: "Ireland is likely to face tough questions about its corporate tax regime when EU finance ministers gather today in Vilnius for a two-day meeting, following confirmation that the European Commission has begun a preliminary inquiry into the country’s tax practices." Repeat with me... there is nothing in these codes to worry about. "... Ireland, Luxembourg and the Netherlands will be under pressure to defend their tax structures amid claims that all three countries may have offered tax deals to specific companies in breach of state aid rules." Clearly all G7 nations, plus all EU nations are just being taken for a ride by someone, somewhere, who got it into their heads that there is something questionable going on with Irish tax system. In case you have doubts: "Dublin moved quickly yesterday to deny suggestions that Ireland had engaged in anti-competitive behaviour, with Taoiseach Enda Kenny insisting that the State was committed to a “transparent” system. Tánaiste Eamon Gilmore said that Ireland’s tax regime was open and “statute-based”. He said his understanding was that the inquiry was part of an “information-gathering exercise which is done from time to time”." Yes, that's right folks: 'from time to time' 'routine stuff'... Would Mr Gilmore - with his wisdom and perfect knowledge of the matters suggest to us when was the last time the 'routine' thingy 'gathering' such information was done? Or when was the last time G7 and G20 discussed Ireland's tax rule before 2011-2013? Just for the record, please, Mr Gilmore?

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BVI Government Discusses Foreign Account Tax Compliance Act

The British Virgin Islands jurisdiction has started to discuss the Foreign Account Tax Compliance Act (FATCA) with the US Department of the Treasury. According to BVI Premier Orlando Smith, who told this to reporters on August 20, 2013, the territory is talking about the “intergovernmental agreement” with the US to comply with FATCA.

The Premier expressed the opinion that this course of action is the best for the BVI, and noted that its financial services industry complies with it.

The Foreign Account Tax Compliance Act provides that the Inland Revenue Service obtains information on accounts of US taxpayers, held abroad at foreign financial institutions. If foreign financial institutions fail to disclose information on their US clients, account ownership, and changes on the account balance, it will result in the requirement to withhold 30 percent tax on US source income.

In August, the Cayman Islands has concluded negotiations with the United States on agreements for automatic information exchange under the Foreign Account Tax Compliance Act, and Bermuda and the Bahamas have also expressed their intention to comply with FATCA.

Brian Obvi,
Offshore Analyst

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19/8/2013: 'Tax Haven' Ireland in the (2009) news again

I've been tracking articles relevant to the debate on the tax haven status of Ireland in relation to corporation tax for some time now.

Here's the last link which sets the chain of previous links on the topic:
http://www.fergco.co/2013/06/1062013-corporate-tax-haven-ireland.html

And since the above, I had couple of posts relevant to the subject:
http://www.fergco.co/2013/06/1662013-minister-in-northern-ireland-is.html
and
http://www.fergco.co/2013/07/2272013-g20-spells-out-squeeze-on-tax.html

Here are couple of most recent ones:

The Guardian covers 2009 case of Vodafone in two stories:
http://www.theguardian.com/business/2013/aug/18/vodafone-tax-deal-irish-office
http://www.theguardian.com/business/2013/aug/18/tax-vodafone-dublin
while the Tax Justice Network responds to the OECD Action Plan on corporate tax avoidance, explicitly identifying Ireland as a 'tax haven'
http://blogs.euobserver.com/shaxson/2013/07/19/press-release-response-to-oecd-action-plan-on-corporate-tax-avoidance/
and lastly the editorial in the EUObserver that also labels Ireland a 'tax haven':
http://blogs.euobserver.com/shaxson/2013/05/02/the-capture-of-tax-haven-ireland-the-bankers-hedge-funds-got-virtually-everything-they-wanted/

Note 1: The Guardian article references EUR67 million rebate on EUR1.04 billion in Vodafone dividends booked into Luxembourg. The dividends were paid on underlying revenues that were booked into Irish GDP and, thus, into our GNI (netting out transfers of royalties etc).These, in turn, required a payment of 0.59% of GNI-impacting activities to the EU Budget. While is is hard to exactly assess how much Irish Exchequer unnecessarily paid into the EU budget due to Vodafone activities, the amount is probably in excess of EUR 5 million and this compounds the transfers of EUR67 million referenced by the Guardian.


Note 2: I am not as much interested in the legal definitions of a tax haven (there are none and, thus, technically-speaking no country can be definitively labeled a tax haven) or in specific groups' definitions of the tax haven (the OECD definition is so convoluted, it virtually makes it impossible for any country with any global political clout - including that acquired via membership in the EU - to be labeled one, while the Tax Justice Network definition is broad enough to potentially include a large number of countries). I am concerned with the spirit of the concept - rent-seeking via tax arbitrage, and with the potential fallout from this in terms of distortions to economic development models and risks arising from same.

Note 3: A 'thank you' is due to a number of people who reminded me - in the context of the Guardian articles linked above - that Ireland charges a 25% corporate income tax on non-trading income. TY to @jameseyryan @Gerpf @JeremyTaxman @seamuscoffey

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Global Forum Released Reports on Information Exchange in BVI and Other 12 Jurisdictions

According to the Tax-news, Global Forum on Transparency and Exchange of Information for Tax Purposes issued peer review reports assessing tax systems of thirteen countries, including BVI, for information exchange. These reviews are to become part of the ratings of 50 jurisdictions, in compliance with G20 and Global Forum efforts to strengthen tax cooperation.

All the reports assess the commitment of the jurisdictions to the international requirements for tax information exchange. Of these 13 reports, 11 are “Phase 2” reports covering the exchange of information in Austria, Bermuda, Brazil, British Virgin Islands, India, Luxembourg, Malta, Monaco, Qatar, San Marino and The Bahamas. Two are “Phase 1” reports, concerning Israel and Lithuania, looking at the legal and regulatory framework for transparency and exchange of information. 

The Chair of the Global Forum Kosie Louw, of the South African Revenue Service, welcomed the reports noting: "The Global Forum is applying pressure on all jurisdictions to implement the standard and co-operate effectively in tax information exchange. The publication of the ratings later this year will be a crucial moment for all those committed to fighting cross-border tax evasion."

Brian Obvi,
Offshore Analyst

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BVI Signed TIEA with Canada

Last week, the British Virgin Islands government has signed TIEA with Canada. This tax information exchange agreement became the 24th for the BVI territory, allowing for the exchange of information by request on criminal and other tax matters in accordance with the procedures.

The TIEA was signed by the BVI Premier and Minister of finance, Dr Orlando Smith, and by the High Commissioner for Canada, Gordon Campbell from the Canadian side.

The Premier Dr Orlando Smith welcomed the agreement, and also, during his speech at the signing ceremony, which coincided with the Caribbean Council Reception, stated that the British Virgin Islands is unequivocally against tax evasion, fraud, money laundering and any forms of illegal activity, and supports UK strategy and UK Prime Minister’s agenda for the G8 summit. The Premier took the opportunity to reinforce the association the BVI has with the UK and welcome the spirit of cooperation between the countries.

Brian Obvi,
Offshore Analyst

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Government Investigates Global Leak of Information on BVI Companies

The BVI government is investigating the ways how the US-based International Consortium of Investigative Journalists (ICIJ) received information on BVI companies, which is private. According to BVI Premier and Minister of Finance Dr Orlando Smith, this is an “illicit” leak of information used to attack the BVI financial services industry, which is actually fully compliant with the law and international guidelines.

The names of many BVI offshore company owners have been published by ICIJ, in collaboration with the Guardian newspaper and other international sources. This became the result of the leak of internal files of offshore incorporation agencies in the British Virgin Islands and some other tax havens – one of the biggest information leaks in history, which revealed many individuals and the details of their financial dealings through offshore accounts. 

This leak has already caused global reaction from governments and politicians. For example, Britain’s prime minister David Cameron is under pressure to act against the secretive offshore industry at June's G8 summit, as leaked evidence continued to show that politicians and tycoons from all over the world have used the BVI to hide their funds. Also, this week the European Commission announced an action plan to combat tax fraud and evasion, which was approved by Britain, France, Germany, Italy and Spain.

Orlando Smith said in his statement: "While the overwhelming majority of persons use international financial centres for legitimate purposes, there are those that will abuse the system. Where wrongdoing is discovered, appropriate enforcement action is and will be taken. We continually review our legislative regime to ensure transparency, co-operation and compliance with international standards."

Brian Obvi,
Offshore Analyst

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BVI Delegation Visited Business Conferences in Dubai

In March, the British Virgin Islands delegation visited the two conferences in Dubai, with the purpose to discuss potential co-operation in the sphere of financial services, and attract funds and business to the BVI.

The Hedge Funds World Conference at the Jumeirah Beach Hotel in Dubai and the Society of Trust and Estate Practioners' "Opportunities for the Flow of New Wealth Conference" were organized to discuss business and investment possibilities in Dubai, particularly from tax-free Dubai International Financial Center.

Elise Donovan, the Executive Director of the BVI International Finance Center, commented on the events: “We were given a very warm welcome on our return to the United Arab Emirates and it is clear that many investors from across the region recognize the advantages of using BVI structures and services for conducting international business.”

She also said that the British Virgin Islands is an “attractive option to investors from the Gulf States looking to acquire BVI company structures for a multiplicity of investing and other cross-border transactions. BVI’s structures are easy to use, flexible, widely accepted and cost-competitive compared to other products being offered in the region."

Brian Obvi,
Offshore Analyst

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BVI signed TIEA with Czech Republic

On June 13, the British Virgin Islands has signed a tax information exchange agreement (TIEA) with the Czech Republic. The Agreement was signed in Prague, the BVI was represented by the BVI's Deputy Premier and Minister of Health and Social Development Dancia Penn, and the Czech Republic was represented by First Deputy Minister Ladislav Mincic.

The parties also agreed to a Protocol setting out that no prejudicial or restrictive measures will be applied to residents or nationals based on harmful tax practices.

The statement issued jointly by the governments of the British Virgin Islands and the Czech Republic, included the following: “The Czech Republic and BVI have long been active in international efforts in the fight against financial crimes and each share a common commitment to develop and comply with international standards on money laundering, terrorist financing and financial regulation. The Czech Republic recognises the BVI government's reputation as a constructive and co-operative member of the international community with a globally integrated and responsible finance centre.”

The TIEA signed by the BVI and the Czech Republic provides for the exchange of information by request on civil and criminal tax matters, in accordance with the OECD standards. This is already the twenty first Tax Information Exchange Agreement signed by the British Virgin Islands, the previous one was concluded with the Republic of India.

Brian Obvi,
Offshore Analyst

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BVI Signed Twentieth TIEA

The Government of the British Virgin Islands has signed Tax Information Exchange Agreement (TIEA) with the Republic of India. The Agreement was signed by Deputy Premier and Minister of Health and Social Development Honourable Dancia Penn OBE QC and the High Commissioner of India to the UK His Excellency, Nalin Surie.

In a Joint Declaration signed with the TIEA both parties state that their countries are active, constructive and cooperative members of the international community with globally integrated and responsible finance centres. It is also stated that India and BVI have long been active in international efforts in the fight against financial crimes, and each of them shares a common commitment to develop and comply with international standards on money laundering, terrorist financing and financial regulation.

Honourable Dancia Penn welcomed this agreement, saying that India is a key market for financial services business of the British Virgin Islands. Also, she said that the BVI is fully committed to pursuing further discussions with the Government of the Republic of India, and the jurisdiction will look to build on the important trading and cultural ties that already exist between the countries.

The Agreement with India is the 20th TIEA of the British Virgin Islands. To answer the OECD guidelines and the new international tax standard, jurisdictions are required to sign at least 12 TIEAs.

Brian Obvi,
Offshore Analyst

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BVI Identified as One of Special Tax Havens by Indian Government

The government of India approved notification of nine offshore jurisdictions as 'specified territories' to officially initiate information exchange with them and modify regulations to combat tax evasion. The tax havens classified as special territories are British Virgin Islands, Bermuda and Cayman Islands, Gibraltar (all of them being British Overseas Territories); also British Crown Dependencies Guernsey, Isle of Man and Jersey; Netherlands Antilles, and Macau, a Special Administrative Region of the People's Republic of China.

The special status of these jurisdictions allowed Indian government to officially initiate talks with them with regard to tax avoidance, exchange of information, and assistance in collection of income tax.

Brian Obvi,
Offshore Analyst

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Britain advices BVI and other tax havens to implement more taxes

On October 29, 2009, an independent review commissioned by the UK Government was issued, led by Michael Foot, former managing director of the UK's Financial Services Authority. The main concern of the report is the analysis of the situation in the offshore financial centres that are British Crown dependencies. These are Guernsey, Isle of Man and Jersey (where the situation is more favorable than in remote jurisdictions), and offshore territories Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Turks and Caicos. All these countries have suffered from the global financial downturn, because their economy was to a much extent based on international finances, and, as Mr. Foot noted in the report, they must review their taxation policy to improve the situation.

Foot argued that the Caribbean offshore centres, including the British Virgin Islands, needed a diversified tax base. By his words, there is a need for value-added taxes, as well as corporate taxes, levied on companies' profits. These new taxes may be of great impact for the Caribbean tax havens, which have attracted international businesses by their low tax rates: the report states that the BVI and other British territories comprise nearly two-thirds of the offshore market.

Some of the offshore centres refused the implementation of new taxes, but Foot said that keeping tax rates too low might be harmful in the long-term and contribute to the increase of international pressure on tax havens.

Foot also said in the report that many of the territories received lower revenues as the sectors of tourism and finance which were of main importance for their economy suffered very much because of the worldwide economic crisis.

The report received the support of Government of Great Britain, which has varying degrees of control over the territories' domestic and foreign policy. By words of Stephen Timms, the Financial Secretary to Britain's Treasury, this report “sends a strong signal to overseas financial centres that they must ensure that they have the correct regulation and supervision in place.”

Brian Obvi,
Offshore Analyst

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BVI and Other Jurisdictions Protest Against Blaming Them

After the summit of the G-20 leaders, which was held on September 24-25 in Pittsburgh, Pennsylvania, offshore jurisdictions in the Caribbean and Atlantic regions started to protest against the attempts of the countries of the Group 20 to penalise them for not complying with taxation and transparency standards, which only become stricter, and take other steps that make the offshore centres the image of shady tax havens.

The leaders, policymakers and business chiefs of the offshore centres, including the Cayman Islands, the British Virgin Islands, Bermuda, Belize and many others, expressed the common opinion that their countries are used as the scapegoats for the global financial crisis and downturn. By their words, it is not fair that they are treated as hide-outs for tax evaders and crooks, and this anti-tax haven “finger pointing” is just the attempt to shift blame away from the policies and tax regulation methods of the world's economic leaders.

In April 2009, the leaders of G20 group and the OECD issued the “grey list” of offshore countries which did not fully comply with internationally agreed tax standards. There were more than 12 Caribbean jurisdictions on the list, including BVI and Bermuda. The governments of these countries made efforts to get themselves out of this list, and most of them succeeded in it, signing 12 bilateral tax agreements. BVI and the Caymans were excluded from the “grey list” in July 2009, Bermuda was moved to the “white list” in June, and other Caribbean states are signing tax treaties.

Brian Obvi,
Offshore Analyst

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BVI Signs TIEAs with the Kingdom of Netherlands, the Netherland Antilles and Aruba

In the mid of September, the Premier and Minister of Finance of the British Virgin Islands, Hon. Ralph T. O’Neal, OBE , signed additional Tax Information Exchange Agreements with the Kingdom of the Netherlands, the Netherland Antilles and Aruba. After signing these TIEAs, the number of agreements signed by the BVI achieved 15.

The BVI and the Netherlands already have legislation providing for co-operation and the exchange of information in tax matters. The new TIEA between the British Virgin Islands and the Netherlands will allow the exchange of information by request on civil and criminal tax matters.

The Netherlands State Secretary for Finance welcomed the signing of the Agreement. Both jurisdictions expressed common intention to pursue other areas of mutual co-operation to further develop their relations. The Kingdom of the Netherlands also further recognised the BVI Government's reputation as a constructive and co-operative member of the international community.

The 12 TIEAs standard set, that was required by the OECD, for the British Virgin Islands consisted of
the United States of America,
the United Kingdom,
Australia,
New Zealand,
France
and the Nordic Alliance including
Sweden,
Norway,
Finland,
Denmark,
Iceland,
The Faroes and
Greenland.

Premier O'Neal stated in his comments that the BVI is close to signing further TIEAs with other OECD countries with which they have not signed the agreements yet.

Brian Obvi,
Offshore Analyst

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BVI Moves Out of OECD “grey list”

After the British Virgin Islands signed tax information exchange agreement with New Zealand, which became its 12th pact, it came in line with OECD standards for moving it to the “white list” of jurisdictions. So, last week BVI and the Cayman Islands joined the list of countries using internationally recognized tax standards, as it was said by the Organization for Economic Cooperation and Development.

Since April 2009, when the G20 group of countries in co-operation with the OECD published a “grey list” of more than 30 countries, including BVI, that had agreed to move towards tax transparency standards but had not signed the necessary international records.

To get off the list, governments of these financial centres had to sign at least 12 bilateral tax agreements in line with OECD standards. Both the British Virgin Islands and the Cayman Islands signed pacts with New Zealand to provide the needed amount of bilateral treaties.

By words of the head of the OECD's Center for Tax Policy and Administration, Jeffrey Owens, the British Virgin Islands and the Cayman Islands took their place “alongside other countries that have substantially implemented the internationally agreed tax standard." He added that since April, six jurisdictions have moved to the “white” list.

By signing the 12th agreement and moving from the “grey list” of jurisdictions, BVI can avoid the accusations of being non-cooperative center favouring tax evaders and harboring those who hide billions of dollars out of reach of their home authorities.

Brian Obvi,
Offshore Analyst

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Results of G-20 Summit: Further Implementation of Tax Standards Recommended to BVI

On April 2, 2009, during the economic summit of G-20 leaders, which took place in London, the G-20 and the OECD adopted its strategy of tax havens blacklisting. Other areas which experienced tougher regulations were hedge funds and banking industry. As regards offshore industry, the report published by the OECD includes the assessment of 82 financial centres concerning their progress towards the “internationally agreed tax standard.”

The G-20 summit did not single out any specific plans for further regulatory implementation, and leaders at the summit agreed to recognise OECD guidelines. One of the main criteria how the jurisdictions are classified is exchange of information on request in all tax matters for the purposes of administering and enforcing domestic tax law. So, it is important how many Tax Information Exchange Agreements are signed by the countries.

OECD recognized the strong position of the Cayman, the British Virgin islands, and Jersey, as countries committed to the internationally agreed tax standards. However, the BVI and the Cayman Islands, among other jurisdictions, were included in the “grey list”, as those which have not yet substantially implemented them. The most familiar and most popular offshore financial centres have been put on the “grey list”, among them Luxembourg, Switzerland, Singapore, Bermuda, Gibraltar, the Turks and Caicos, Monaco, Andorra, and others.

Later on, the seven British crown ependencies, including BVI, were set by the Prime Minister a September deadline to sign up the missing number of TIEA's (which should be twelve). Gordon Brown has written to all of them that he expects them to move beyond meeting the OECD's minimum standards on co-operation, and come to the maximum transparency.

Brian Obvi,
Offshore Analyst

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Premier Evaluates BVI Financial Services Sector

On February 25, Honourable Ralph T. O'Neal, Premier and Minister for Finance for the territory, talked about concerns that the Virgin Islands (UK) will become target for new regulations. These concerns followed statements by leaders of major EU countries, including the Prime Minister of the United Kingdom, about the need to list un-cooperative financial centres and tax havens and to impose sanctions against them.

Ralph O'Neal said that the BVI is recognized as a well-regulated, transparent and co-operative financial centre. He also noted that following the signing of the BVI's Tax Information Exchange Agreement (TIEA) with the UK in October 2008, the UK's Financial Secretary “commended the BVI for the leadership demonstrated in the area of tax policy and its potential to strengthen their reputation for good governance in financial matters”.

The Premier also mentioned that the BVI territory received positive references from the OECD's Director of Tax Policy Administration, Mr. Jeffrey Owens, who included the BVI in the list of the offshore jurisdictions fully compliant with the organisation’s transparency standards, and from the Caribbean Financial Action Task Force, which recognised the BVI Territory's compliance with recommendations designed to fight money laundering and terrorism.

Ralph O'Neal confirmed Government's commitment to co-operate with international regulatory bodies and to work together with the Financial Services Commission to ensure the BVI retains the balance between the support of financial services community, and co-operative regulatory framework.

Brian Obvi,
Offshore Analyst

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OECD Plans to Strengthen Standards Regulating Offshore Financial Industry

The OTCC Meeting in the course of which BVI signed taxation agreements, has been held in the period when the OECD prepared to crackdown on offshore and low-tax financial centres which were still deemed to be “uncooperative”. This was part of plans by the member governments of OECD to further strengthen regulatory safeguards in the global financial system, and followed the publication of parliamentary reports that accused the Foreign and Commonwealth Office of complacency in the monitoring of tax evasion and money laundering risks in certain offshore financial centres.

In the last period, the UK government has experienced the increasing pressure to enforce higher standards of transparency in some of the 14 offshore territories, which are still under British sovereignty, and among then there are British Virgin Islands.

According to the UK Authorities Report on Financial Services Regulation in BVI and other offshore centres, published in May 2008, the regulation standards in the areas such as banking, money laundering, insurance and securities are not as good as those in the Crown Dependencies (Jersey, Guernsey and the Isle of Man).

These claims and submissions were discussed by the BVI and the Cayman Islands, and by some other offshore centres among British dependencies. The offshore jurisdictions argued that they have brought their regulatory standards in accordance with the OECD FATF requirements.

The BVI government informed the Commons Select Committee on Foreign affairs that the claims that the so-called offshore centres are not properly regulated and are a haven for tax evasion, money laundering and terrorist financing, are unfair, and 'too often no effort is made to give recognition to the regulatory advances of such offshore jurisdictions as the BVI.'

Brian Obvi,
Offshore Analyst

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BVI and Australia Governments Sign Tax Information Exchange Agreement

The Premier of the British Virgin Islands (BVI) Hon. Ralph O’Neal and the Australian Assistant Treasurer and Minister for Competition Policy and Consumer Affairs Chris Bowen signed Tax Information Exchange Agreement (TIEA), which provides for full exchange of information on request in both criminal and civil tax matters.

The document is based on the existing legislation in both countries, already providing for mutual legal assistance in criminal matters. Now both governments will share information to eliminate harmful tax practices. The agreement reflects the commitment of the governments of Australia and BVI to implement OECD principles of transparency and effective information exchange, and international standards on anti-money laundering and counter-terrorism financing. The Australian Government has welcomed the BVI admission as a full member to the International Organisation of Securities Commissions, where it joins more than 100 jurisdictions with recognised high standards of regulation and compliance.

According to the TIEA, Australia and the BVI have agreed not to apply prejudicial or restrictive measures based on harmful tax practices to residents or nationals. Australia will not refer to the BVI as a 'tax haven' on the governmental level, and instead it will list the jurisdiction in the Taxation Administration Regulations 1976 as an 'information exchange country'. As a result of the changed status of the BVI, its residents will receive access to reduced withholding tax rates on distribution of certain income they may receive from Australian managed investment trusts.

This is the fourth Tax Information Exchange Agreement for Australia as one of the leading countries implementing international co-operation on tax matters, and the second for the BVI.

Also, Australia and the BVI have signed an agreement for the allocation of taxation rights with respect to certain income of individuals, which will provide benefits to Australian and BVI residents. Both countries also agreed to enter into discussions to develop further co-operation in areas of mutual interest.

Ralph O'Neal in his comments welcomed Australia's recognition of the high regulatory standards set by the BVI, and the continuing engagement of the financial centre in the OECD’s Global Forum on Taxation.

Brian Obvi,
Offshore Analyst

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BVI International Finance Centre Welcomes IMF's Decision to Halt Tax Haven Discrimination

The BVI Government welcomed recent decision of the International Monetary Fund (IMF) to stop discrimination between onshore and offshore financial centres. Last month, the IMF has combined its assessment programs for OFCs and FSAP program. In the announcement of this decision, the IMF acknowledged that globalisation has "increased the range of cross-border transactions and intermediation in many countries, as well as by the active efforts of a number of countries to build or promote offshore business."

The British Virgin Islands International Finance Centre, the organization responsible for the marketing and promotion of the BVI financial services industry, welcomed this decision, as creating more level playing field on which financial centres will be judged, based on their regulatory standards rather than geographic location or size.

Information Service of the BVI Government commented that the traditional distinction between onshore and offshore financial centres meant that territories such as the BVI, with significant offshore financial activities, were often regarded as tax havens that support tax evasion, money laundering and other illicit financial activities.

Executive Director of the BVI IFC Mrs. Lorna Smith said: "We have long made the point that it is not a question of onshore or offshore, it is a question of sound or weak regulation and we are delighted that the IMF has recognised this." She also assured that there are strict regulations concerning the operation of the financial sector in the BVI territory.

The BVI IFC is hoping that other international bodies and regulatory organizations will follow the example of the IMF and end this distinction between onshore and offshore jurisdictions.

The IMF also announced about its plans to adopt a more standardised surveillance of the financial sector of economy.

Brian Obvi,
Offshore Analyst

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