Some Countries Still Lag On Tax Transparency Law - OECD

Joseph Milton London 3 June 2011

Some Countries Still Lag On Tax Transparency Law - OECD

Hungary, the Philippines, Singapore and Switzerland have all been urged to improve their tax transparency laws while a number of other jurisdictions have been given a clean bill of health on these issues by the Organisation for Economic Co-operation and Development.

Members of the Global Forum on Transparency and Exchange of Information for Tax Purposes have released nine new peer review reports as part of ongoing efforts to fight international tax evasion and bank secrecy.

“Countries take the peer-review reports very seriously and they have all pledged to address the deficiencies we identified. In some cases they started to act even before our reports were completed,” said Mike Rawstron, chair of the global forum, in a statement. “This shows that peer reviews are working and that we are moving towards a truly level playing field.”

Among significant improvements identified by the reviews, Belgium passed a law ending bank secrecy for exchange of information purposes and the Cayman Island tightened up accounting rules for offshore entities, while Ghana proposed legislation requiring owners of companies and trusts to provide information and commenced negotiations to extend its network of information exchange agreements. In addition, authorities in San Marino now have access to all relevant information for both civil and criminal tax matters; the southern European state also strengthened disclosure obligations relating to beneficial ownership of companies and trusts.

France and Italy, says the report, have good legal and regulatory frameworks in place, allowing authorities full access to all relevant information, although response times could be faster in both countries and the time required to ratify treaties in Italy could be improved.

The Isle of Man should improve the availability of accounting information for limited partnerships, and local authorities should clarify with partners its practice of disclosing information to other enforcement agencies, according to the report. However, the island’s framework for the exchange of information is in place and the report describes the relationship between tax authorities and their information exchange partners as positive.

The report says New Zealand has a strong network of exchange of information agreements and an effective framework for the availability of ownership, accounting and bank information. However, the country could do better on the requirements relating to nominees and accounting records for liquidated companies.

The US exchange of information program is extensive and very active, and well-regarded by its peers, though the review recommends the country speeds up its response times. The legal and regulatory framework for the exchange of information in the US is in place, although some improvements are needed with respect to ownership and accounting information for some limited liability companies with single foreign owners.

According to the report, Hungary has deficiencies in its legal framework for the exchange of information and should improve the availability of information on companies and partnerships and make information more accessible.

The Philippines has made significant progress in exchange of information and has passed an Exchange of Information Act, helping end bank secrecy. The country also has a robust treaty network. However, some deficiencies remain in the Philippines’ laws regarding nominees as well as in some of its accounting laws. The report recommends that the country continues to expand its treaty network to ensure that it covers all relevant partners.

In Singapore, the legal and regulatory framework for the exchange of information is in place, but some areas should be improved, according to the report. The country’s authorities should have the power to obtain all relevant information for all of its exchange partners regardless of whether they need the information for their own tax purposes. The report also recommends improvements in the exchange of information network to ensure Singapore has agreements that meet international standards with all relevant partners.

Switzerland has made rapid progress in implementing its commitment to internationally agreed standards on information exchange, says the report. However, in a few areas the country still falls short of the standard: bearer savings books are being phased out but still exist, and only a limited number of Switzerland’s exchange of information agreements meet international standards. Switzerland’s Phase 2 review, due to take place in the second half of 2012, will only go ahead if it has brought a significant number of its agreements in line with the standard, says the report.

In general, the most common deficiencies identified by the OECD relate to a lack of available information on persons represented by nominees and on foreign companies, incomplete accounting information for some forms of limited liability companies and partnerships, and slow responses by requested countries.

An additional 25 peer review reports are set to be completed by the OECD by November 2011, before the G20 Summit in Cannes, bringing the number of reviews to about 60.

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