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TIEAs mount as G20 meeting approaches

Monaco and San Marino, two low-tax European microstates, have agreed a tax information exchange agreement (TIEA), as the number of such treaties by offshore jurisdictions mounts ahead of a scheduled m

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Monaco and San Marino, two low-tax European microstates, have agreed a tax information exchange agreement (TIEA), as the number of such treaties by offshore jurisdictions mounts ahead of a scheduled meeting of G20 ministers next month.

The TIEA was San Marino’s first TIEA, and Monaco’s second, although Monaco has agreements with two additional countries that are considered comparable to TIEAs.

New Zealand, which only had one TIEA in force at the beginning of July that dated back to 2007, has signed seven of the treaties in the past two months, of which three were agreed in the past week.

These were with Gibraltar, the Cayman Islands and British Virgin Islands (BVI) – the latter two Caribbean tax havens now having made it onto the OECD’s white list of countries that have "substantially implemented" its tax standard, joining the ranks of the Isle of Man, Jersey and Guernsey, as well as many ‘onshore’ states such as the UK.

Last Thursday Gibraltar also signed a TIEA with Germany, bringing its total to four, and two days before that, as reported by IA, the UK agreed a TIEA with Liechtenstein.

TIEAs are bilateral agreements under which countries or territories agree to cooperate in tax matters through the exchange of information.

The model currently in use was drawn up by the Organisation for Economic Cooperation and Development (OECD) in 2002 and was designed to provide a framework for enabling high-tax jurisdictions to obtain financial records from low-tax ones.

Before this year, only 45 had been signed, fewer than the 58 that have been agreed since January.

The OECD has set 12 TIEAs with what it regards as “significant countries” as the minimum necessary for a jurisdiction to be regarded as having substantially implemented its standards for the exchange of information and thus guaranteeing it a place – for now – on its so-called white list.

Sanctions threat

Although no specific date for meeting this minimum standard officially has been given, leaders of the G20 countries have repeatedly indicated that any countries failing to show a demonstrable willingness to cooperate with the OECD tax transparency standard risk the imposition of sanctions.

It is understood these could include the imposition of taxes on funds held in non-co-operative countries and the possible withdrawal of international aid or financial support to the jurisdiction.

Press reports following last month’s summit between British Prime Minister Gordon Brown and French President Nicolas Sarkozy indicated the leaders spoke of a March 2010 deadline for so-called tax havens to meet the international standards, after which sanctions might begin to be imposed.

The G20 ministers are due to meet next on 24 and 25 September in Pittsburgh.

The full list of TIEAs may be found on the OECD’s website at www.oecd.org. 

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