Offshore

We Work For All Jurisdictions Great And Small - OECD Policymaker

Chris Hamblin Editor Compliance Matters Offshore Red 18 May 2015

We Work For All Jurisdictions Great And Small - OECD Policymaker

A recent high-ranking OECD official explained the organisation's approach to financial confidentiality and the impact of compliance drives by regulators.

This article is written by Chris Hamblin, the editor of Offshore Red and Compliance Matters, sister publications to this news service.

Pascal Saint-Amans of the Organisation for Economic Co-operation and Development caused amusement at the recent Jersey Finance conference in London when he expressed the OECD’s desire to “level the playing field” and “give an equal opportunity” to all jurisdictions, great and small.

The French former civil servant and director of the OECD's centre for tax policy and adminitration told the audience: "What is shaping the [global tax information exchange] agenda? The world is made up of tax sovereignties - tax is the basis of sovereignty - and governments don't want to yield it. But without co-operation, they have realised that they need to sacrifice their nominal sovereignties to protect their real sovereignty."

Not all listeners could discern a clear meaning from these words, but Saint-Amans went on to say: "It is a 'big country's' agenda; that's a matter of fact, whether we like it or not." He followed up this blunt remark by stating: "I'm neutral!"

"We [at the OECD] are tax professionals [and as such] we don't like politicians taking on the tax agenda. Tax is complex and politicians look for easy solutions and quick fixes. Now, international tax is on the radar screen of all governments for the first time in history. Panama is not moving towards transparency; the Seychelles are moving very fast. There are some lost Pacific islands. Nauru is not committed, nor are the Marshall Islands or Bahrain; Luxembourg and Cyprus and other jurisdictions are moving fast. Transparency is good for governments and for taxpayers. Countries that do not move will pay a high reputational price.

"We've moved to the automatic exchange of information. I am very happy with the [progress of the] Swiss, but if they'd moved earlier, we wouldn't have had FATCA. I think that the next two years will be about helping new jurisdictions meet their obligations. The more transparent the world gets, the more we have to pay attention to confidentiality,” he said.

In Saint-Amans' lexicon, “transparency” presumably refers to one government giving information about people's bank accounts to their home governments and “confidentiality” means nobody doing so: a paradox.

In view of the arguably Orwellian habits of OECD communications, however, he might have been changing the use of “confidential”.  He might, perhaps, have been referring to the idea that the receiving tax authority should keep the information away from only some people, for example the general public, while officials of all kinds are free to pore over it.

A paper from 2012 on the subject of article 26 of the OECD tax convention (to which Saint-Amans referred) suggests this obscurely, although it never actually says whether it really thinks “confidentiality” is different from preserving the privacy of people's information from governments: "Law enforcement agencies and judicial authorities receiving information under the last sentence of paragraph two must treat that information as confidential consistent with the principles of paragraph two."

Since the officials are reading it already, it is not confidential from them and logically this suggests that, in the eyes of the OECD, information about people can remain “confidential” even at a moment when many officials are looking at it.

Saint-Amans said that when a high net worth resident of one country gives his personal information to the government of that country, which then passes it on to his home government, he wants it to "stay in the right hands”. Some mirth was heard in the audience as people recollected the malodorous reputation that Her Majesty's Revenue & Customs has for losing laptops containing data on millions of taxpayers on multiple occasions.


The Frenchman, however, seemed to have countries other than the UK on his mind: "Can you do an automatic exchange of information with all the countries? No, you cannot. You need a mechanism to check countries out. The ones that need automatic exchange the most are corrupt developing countries." He thought that the Global Forum on Transparency and Exchange of Information for Tax Purposes would do something about this eventually.

More levity bubbled to the surface when Saint-Amans turned to another OECD bugbear: "The second challenge is about US Delaware. It is the elephant outside the room...and inside the room! [There should not be] a single LLP when you don't know who the owner is and what's in the company." To the mirth of the audience, he launched an appeal: "They have to change this! We can be hopeful that the world has changed. It's not limited to Delaware. It's all the US states." Saint-Amans expressed the rather optimistic hope that the European Union, of all bodies, would help bring this unlikely event about because it "speaks with one voice”.

Saint-Amans suggested the OECD would act against countries that did not obey its standards - something that most people would consider a move onto the offensive but which he classified as “defensive”, although he did not say how this could be.

"Finally, we need to level the playing field, meaning that those who are not playing by the rules [this presumably includes Delaware and the United States] should not be allowed to get any benefit from that. You must implement your commitment, otherwise the rest of the world will not be happy. We're working on defensive measures against those who are not implementing the standards. My secretary-general, Angel Gurria, fought to have one standard, one system; the EU wanted its own," he said.

On the subject of base erosion and profit-shifting or BEPS, Saint-Amans said the old, existing double-tax-treaty system was bad because the rules were so good at rubbing out double taxation that they facilitated 'double non-taxation'. He told the audience, composed of trustees and other wealth experts mainly from Jersey and the UK, that the negotiations were "at crunch time" and that things were taking shape. He also encouraged everyone to have their say, as several discussion drafts were still open for public discussion. He reassured prospective commentators that his office always reads every comment. The timetable for BEPS is a two-year one.

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes