Financial Transparency Coalition

A while ago we pointed to a study by Misereor that had concluded, on the subject of double tax treaties (DTTs) and tax information exchange agreements (TIEAs), that

Only 6 percent of DTTs show a signature of a Low Income Country (with an even smaller participation of 3 percent for Least Developed Countries). The situation with TIEAs is even worse: There is no single LIC (leaving aside LDC) as signing party of any TIEA documented on the OECD website. . . . While G20 and OECD are promoting DTTs and TIEAs as centrepieces of a global standard on transparency and cooperation in tax matters statistics show that poor developing countries are simply left out in this picture. How these countries should get access to “the benefits of a new cooperative tax environment” (G20 London Summit) according to the recipes of the G20 and the OECD remains an open question.

Well, the pattern remains broadly the same – but occasionally better things do happen. This story from South Africa’s Sunday Times reports that:

“Guernsey, Jersey, San Marino, the Cayman Islands, the Bahamas and Bermuda aren’t going to be much help keeping your earnings – legitimate or otherwise – hidden from the tax collectors of the SA Revenue Service. MPs heard that tax information exchange agreements (TIEAs) are to be signed with all five, and that once signed the main benefit to those who keep their money there – secrecy – will be gone.”

This is a great exaggeration – the agreements will be under the OECD’s flawed “on request” standard of information exchange – which means you have to know what you are looking for, before you ask for it. On a case by case basis, each agreement is better than nothing, but taken from a global systemic point of view, it is probably worse than useless because it allows governments to claim that something is being done, while allowing business to carry on more or less as usual. Read more about all this here.

Still, the latest agreements contain some things that are to be welcomed, beyond the fact that we are talking about a major developing country here. The Sunday Times continues:

The agreements extends exchanges to taxes of every kind and description: “Not only income but also consumption taxes such as VAT,” Van der Merwe said. The information shall be exchanged whether or not the requested party has a domestic tax interest in it or even whether conduct being investigated would or would not be a crime under its laws.

The laws of the former tax havens should allow for the exchange of information held by banks, other financial institutions and any person including nominees and trustees acting in an agency or fiduciary capacity. It should also include information regarding the legal and beneficial ownership of companies, partnerships, foundations and other persons – including in the case of collective investment schemes, information of shares, units and other interests, and in the case of trusts, information on settlers, trustees and beneficiaries. “It is really wide,” said Van der Merwe.

The agreements will also allow representatives of the requesting country – i.e. the SARS investigators – to be present at interviews being conducted in the requested country. They won’t conduct the interviews, but they will be there.

This all looks useful. This is also curious – Guernsey asking to learn from South Africa:

Guernsey made a special request for a clause to be included in their agreement for the parties to agree to exchange technical know-how, develop new audit techniques, identify new areas of non-compliance and jointly study non-compliance areas. “They were anxious to benefit from our expertise in these areas,” Van der Merwe said.

According to South Africa’s Business Report:

According to Sars official Ron van der Merwe, there are a few other similar agreements in the pipeline.

Interesting developments.