TIEAs: Proof is in the Pudding

On 25 March the OECD published a background information brief entitled ‘Promoting Transparency and Exchange of Information for Tax Purposes’ which also highlights the progress made in 2009 in tackling tax avoidance and tax evasion.  During 2009 more than 300 agreements have been signed by jurisdictions which were identified by the OECD as not substantially implementing the standards developed by the OECD.  25 jurisdictions have been elevated to the white list for having signed up to the gold standard of 12 TIEAs (Tax Information Exchange Agreements).  More importantly, these standards are with countries which have an interest in obtaining information for tax purposes.

Speaking at a conference entitled “The future of onshore and offshore financial centres” in December last year, Jeffrey Owens, Director of the OECD’s Centre for Tax Policy and Administration, delivered a keynote speech which addressed the issue of relevance.  The initial criticisms of the gold standard of 12 TIEAs were that it was an absolute test with no quality element.  Jeffrey Owens addressed this and noted that once the structures of TIEAs were in place they would be subject to:

• Monitoring of relevance of agreements (i.e. there had to be economic ties between countries which signed up to TIEAs)

• Reviewing relevant legislation and regulations in countries which might prevent the effective implementation of TIEAs

• Reviews of what happens in practice (i.e. how many requests submitted, information received etc)

The peer review would also address the ‘Delaware problem’ so often cited by Offshore Financial Centres.

This OECD document confirms this.  The peer reviews will be carried out by a dedicated Peer Review Group, which first met in October and December 2009.  The reviews are due to start this year.  Phase one will focus on a review of the legal and regulatory frameworks.  Phase two will assess practical implementation, including recommendations to improve the situation.

The message?  The proof will be in the pudding.  The hare is in front of the greyhounds.  Choose whichever phrase you like but don’t expect the OECD (and the wider international community) to be satisfied just because some bits of paper have been signed.  They want results.

Further Information: http://www.oecd.org/dataoecd/50/0/43606256.pdf

Ed Shorrock is the Director of Forensic & Regulatory Services at BakerPlatt ( www.bakerplatt.com ), an offshore law firm specialising in litigation, financial crime, regulatory and insolvency matters.  Ed has been heavily involved in a variety of regulatory, criminal and civil actions with a focus on the restraint, custody, realisation and confiscation of assets. Having qualified as a chartered accountant in 1998, Ed has managed a range of projects involving asset seizures under drug trafficking and criminal legislation and been involved in regulatory investigations and complex liquidations. He delivers on training programmes focusing on financial crime and compliance issues and is a regular speaker at conferences on these topics and how they affect offshore financial centres.

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