The UK has asked ten crown dependencies to sign tax sharing agreements in a letter issued by UK Prime Minister David Cameron.
Letter From The UK Prime Minister
In this letter, the Prime Minister has requested that the territories should “get their houses in order” adding that, “dealing with tax evasion is not just about exchanging information; it is about improving the quality and accuracy of that information”.
The letter has been sent to the following territories:
British Virgin Islands;
Turks and Caicos Islands;
Isle of Man.
The letter was sent as part of the Government’s aim to encourage transparency and to take measures against tax evasion and avoidance ahead of the G8 summit.
The Removal Of Secrecy
Mr. Cameron advised that the purpose of the summit was to remove the level of secrecy in the tax affairs of companies.
Whilst Mr. Cameron accepts that the territories’ may set their own corporate tax rates, he argues that “lower taxes are only sustainable if what is owed is actually paid, and if the rules to achieve this are set and enforced fairly to create a level playing field right across the world”. Mr. Cameron adds that “there is no point in dealing with tax evasion in one country if the problem is simply displaced to another”.
Potential Opposition From Crown Dependencies
Mr. Cameron has requested that the territories must sign an OECD convention to provide shared assistance in respect of tax, which allows for the sharing of information between countries, with a view to preventing evasion entirely.
The territories currently object to the notion that they are referred to as tax havens and highlight that the competitive advantage they have built over many onshore jurisdictions will be adversely affected. Therefore, any plans to persuade the territories to sign the OECD convention may result in opposition from certain territories.
However, the crown dependencies of the Isle of Man, Jersey and Guernsey have informed Mr. Cameron of their intention to sign up to the OECD convention with representatives from Guernsey stating that the treaty represented “a significant step towards creating a global level playing field in tax information exchange”.
In further developments made ahead of the G8 summit held last month, the Crown Dependencies and Overseas Territories agreed that they will join a Multilateral Convention on sharing tax information.
They have also agreed to produce plans establishing the action they will take to fully implement the Financial Actions Task Force (FATF) standards on beneficial ownership and ensure that the information provided is available to law enforcement and tax authorities.
The action plans on beneficial ownership will lead to increased clarity about who really owns, controls, and benefits from companies, following an announcement from Prime Minister David Cameron on new rules to bring increased transparency on company ownership in order to diminish the risk of money laundering, tax evasion and avoidance, the financing of terrorism and other potential risks.
UK’s Commitment To Eliminating Tax Avoidance
Mr. Cameron believes that these commitments will represent a large change in the level of tax transparency of the Crown Dependencies and Overseas Territories. In addition, it will make it more difficult for individuals to escape paying tax by holding their finances and assets overseas.