Agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland.

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A decision made (26/05/2009) regarding: Agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland.

Decision Reference: MD-C-2009-0036
Decision Summary Title :	Agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland		Date of Decision Summary:	20th May 2009
Decision Summary Author:	Tara Murphy Project & Research Officer		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Ratification of the Agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland		Date of Written Report:	28th April 2009
Written Report Author:	Colin Powell Adviser – International Affairs		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland
Decision(s): The Chief Minister, acting on the recommendation of the Council of Ministers, agreed to lodge ‘au Greffe’ a report and proposition seeking ratification of the Agreement for the Exchange of Information Relating to Tax Matters between Ireland and the States of Jersey, which was signed on 26th March 2009.
Reason(s) for Decision: Negotiations with the Ireland produced an agreement on the following: a tax information exchange agreement which is consistent with the agreements signed previously with other countries such as the United States of America in 2002, the Kingdom of the Netherlands in 2007, the Federal Republic of Germany in 2008 and the Nordic Countries in 2008. agreement for affording relief on double taxation with respect to certain income of individuals and establishing a mutual agreement procedure in connection with the adjustment of profits of associated enterprises; a joint declaration which among other things – recognises the other’s commitment to operate international standards of financial regulation in order to combat money laundering and terrorist financing and to participate in international efforts to tackle financial and other crimes, including fiscal crime; provides that Ireland will use its best endeavours to ensure that where EU Directives or Regulations concerning the regulation of financial services include provisions referring to the position of Third Countries, particularly in relation to assessments of equivalence in compliance with EU standards and access to EU markets, Jersey is treated as fairly and favourably as other Third Countries; welcomes Jersey as a member of the community of nations committed to international cooperation and information exchange on tax matters, and assures the Government of Jersey that Jersey will be fully and equally treated as such by the Irish authorities; provides for an ongoing dialogue to examine what measures could be adopted to further enhance and broaden their political and economic relationship including the further examination of undesired tax barriers and the further extension of the arrangements for information exchange.
Resource Implications: There are no financial or manpower implications.
Action required: Request the Greffier of the States to lodge ‘au Greffe’ the: Agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland.
Signature:		Position: Chief Minister
Date Signed:		Date of Decision (If different from Date Signed):

Agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland.

RATIFICATION OF THE AGREEMENT FOR THE EXCHANGE OF INFORMATION RELATING TO TAX MATTERS BETWEEN THE STATES OF JERSEY AND IRELAND

PROPOSITION

The States are asked to decide whether they are of opinion –

To ratify the agreement for the exchange of information relating to tax matters between the States of Jersey and Ireland as set out in the Appendix to the report of the Chief Minister dated 28th April 2009.

REPORT

Agreement to be entered into with Ireland for the exchange of information relating to tax matters

1. The States are asked to ratify the signed agreement to be entered into with Ireland for the exchange of information relating to tax matters attached as an appendix to this report.

Background

2. In February 2002 Jersey entered into a political commitment to support the OECD’s tax initiative on transparency and information exchange through the negotiation of tax information exchange agreements with each of the OECD Member States.

3. The Council of Ministers current negotiating strategy in respect of tax information exchange agreements is –

to build up good political and economic relationships with individual countries, particularly those in the European Union;
to obtain general support for the Island where matters affecting the Island are being considered within international fora;
to obtain the removal of key barriers to market access, such as black lists;
to recognise that all the Island’s wishes may not be achieved to the outset, and establish a platform from which to build in securing further benefits in the future;
to press for action to be taken by the OECD Member States against the non-committed/non-cooperative jurisdictions who may otherwise be gaining advantage from that position.

4. The Council of Ministers have also seen the negotiation of tax information exchange agreements as one of balance between –

the impact on business arising from the perception that Jersey is ahead of its competitors on transparency;
the impact on business of negative action taken by OECD/EU Member States against non-cooperative jurisdictions, if they should decide that Jersey is in that category;
the impact on business of the positive action taken by OECD/EU Member States when they recognise Jersey as a cooperative jurisdiction.

5. The action the Island has taken in signing tax information exchange agreements has been recognised by the international community. On October 21st 2008 at a Conference on the Fight against International Tax Evasion and Avoidance: Improving Transparency and Stepping Up the Exchange of Information on Tax Matters, held in Paris, the Secretary General of the OECD, commented favourably on the action taken by Jersey in negotiating tax information exchange agreements and stated that what is now required is “a clear political recognition being given to those offshore financial centres that have made progress”. In the Summary of Conclusions of the Paris Conference it is stated that the participating countries “recognise the efforts made by certain jurisdictions [such as Jersey] that have set out a new direction for their financial centres and have signed tax information exchange agreements, which constitute effective instruments of fighting international tax fraud and evasion.

6. Jeffrey Owens, the Head of the OECD Centre for Tax Policy and Administration, said at the signing of the tax information exchange agreements with the Nordic countries in Helsinki on 28th October that “we at the OECD recognise the importance of the progress Jersey has made in signing TIEAs, and in receiving clear political endorsement from OECD member countries. To show that the choice Jersey has made is the right one we recognise the need for firm action to be taken with regard to those jurisdictions that are not showing the same commitment to tax information exchange”. The G 20 Summit in Washington held on 15th November 2008 also issued a declaration which called upon national and regional authorities to implement national and international measures and protect the global financial system from uncooperative and non-transparent jurisdictions that pose risks of illicit financial activity.

7. These sentiments were then clearly reflected in the outcome of the G20 Summit held in London on 2 April 2009. In particular the list of countries published by the OECD in the form of a progress report on the jurisdictions surveyed by the OECD Global Forum in implementing the internationally agreed tax standards. Jersey was included in the list of jurisdictions that have substantially implemented the internationally agreed tax standard – what has become known as the “white list” – in which Jersey sits alongside the United Kingdom, the United States, Germany, France, Japan etc.

8. The importance of achieving this result is evident from the G20 Summit declaration on strengthening the financial system issued on 2 April 2009 which states “we stand ready to take agreed action against those jurisdictions which do not meet international standards in relation to tax transparency. To this end we have agreed to develop a tool box of effective counter measures for countries to consider.”

9. The G20 Summit welcomed the new commitments made by a number of jurisdictions such as Switzerland and encouraged them to proceed swiftly with implementation. The view was also held that if there is not genuine progress in agreeing, implementing and abiding by the necessary international agreements, particularly among those jurisdictions that have only just declared their commitment to international standards, the G20 should be encouraged to take the necessary action to ensure that all abide by the high standards and the level playing field that Jersey has long pressed for is achieved. This view is fully supported by the Council of Ministers.

Procedure for Signing and Ratifying the TIEAs

10. The procedure adopted in respect of individual agreements is for industry to be consulted and for the views of industry to be taken into account by the Council of Ministers in deciding whether to support the signing of a tax information exchange agreement. If the Council of Ministers decide that it would be in the Island’s best interests for an agreement to be signed, both parties to the agreement then exchange signed agreements which allows both to start their ratification procedures contemporaneously. Agreements are signed by the Chief Minister in accordance with the provisions of Article 18(2) of the States of Jersey Law 2005 and paragraph 1.8.5 of the Strategic Plan 2006-2011 adopted by the States on 28 June 2006. Subsequent to the signing by the Chief Minister, agreements are presented to the States for ratification, are published, entered into the official record and regulations are made for the agreements to enter into force when the domestic procedures of the other party also have been completed.

11. The States on 29th January 2008 adopted the Taxation (Exchange of Information with Third Countries) (Regulations) 2008. The Schedule to these Regulations lists the Third Countries, and includes the taxes covered by the Agreements being entered into. As further agreements are entered into, the Regulations need to be amended to include in the Schedule the jurisdiction and taxes concerned. The necessary Regulations to provide for the inclusion in the Schedule of Ireland and the relevant taxes are being presented to the States for adoption subsequent to the ratification of the Agreement for the exchange of information relating to tax matters being entered into with Ireland (P /2008).

12. The Agreements do not come into force until both of the parties concerned have completed their own domestic procedures. The date when an agreement is to come into force is included in a forthcoming Schedule attached to the Regulations.

Agreement with Ireland

13. The negotiations with Ireland produced an agreement on the following, attached as an Appendix to this report –

a) a tax information exchange agreement which is consistent with the agreements signed previously with other countries such as the United States of America in 2002, the Kingdom of the Netherlands in 2007, the Federal Republic of Germany in 2008 and the Nordic Countries in 2008.

The agreement provides for the exchange of information on tax matters on request. However that request has to be formulated in writing with the greatest detail as possible. There can be no “fishing expeditions”. The agreement only comes into force once the States have ratified it and have approved the necessary regulations, and Ireland has completed its own domestic procedures;

b) agreement for affording relief on double taxation with respect to certain income of individuals and establishing a mutual agreement procedure in connection with the adjustment of profits of associated enterprises;

c) a joint declaration which among other things –

recognises the other’s commitment to operate international standards of financial regulation in order to combat money laundering and terrorist financing and to participate in international efforts to tackle financial and other crimes, including fiscal crime;
provides that Ireland will use its best endeavours to ensure that where EU Directives or Regulations concerning the regulation of financial services include provisions referring to the position of Third Countries, particularly in relation to assessments of equivalence in compliance with EU standards and access to EU markets, Jersey is treated as fairly and favourably as other Third Countries;
welcomes Jersey as a member of the community of nations committed to international cooperation and information exchange on tax matters, and assures the Government of Jersey that Jersey will be fully and equally treated as such by the Irish authorities;
provides for an ongoing dialogue to examine what measures could be adopted to further enhance and broaden their political and economic relationship including the further examination of undesired tax barriers and the further extension of the arrangements for information exchange.

14. The negotiation of the agreements has helped to establish a good relationship with Ireland and has helped their understanding of and has influenced favourably their attitude towards the Island. The agreement is considered to enhance the Island’s international personality and generally to lead to a more favourable response to the Island on a wide range of market access and other economic/political issues. There are no implications for the financial or manpower resources of the States arising from the ratification and implementation of the agreements with Ireland.

28 April 2009