Not another mis-step

As of March 2015, more than 90 countries including Trinidad and Tobago gave a commitment in principle to the automated exchange of tax information. In fact our country appears to have given the undertaking of first exchanges by 2017. What is the Global Forum and why should we be concerned?

Tax evasion and the need for effective international cooperation have been placed as an important item on the political agenda in the last decade or more. Indeed, the G20 countries have given this a lot of attention. While admittedly the international community has made progress against tax fraud and evasion, it was considered necessary to guarantee that the progress which was made thus far lead to full transparency and effective exchange of information for tax purposes. The Global Forum on Transparency and Exchange of Information for Tax Purposes founded in 2000 and restructured in September 2009 included non-OECD economies, is charged with in-depth monitoring and peer review of the implementation of the standards of transparency and exchange of information for tax purposes. These standards are mainly revealed in the 2002 OECD Model Agreement on Exchange of Information on Tax Matters and its commentary, and in Article 26 of the OECD Model Tax Convention on Income and on Capital and its commentary as updated in 2004, which has been incorporated in the UN Model Tax Convention. It addresses tax evasion, tax havens, offshore financial centres, tax information exchange agreements, double taxation and money laundering. The forum works under the auspices of the OECD and G20. In 2000 it had published a blacklist of 35 tax havens, but by 2009 the list had shrunk to zero. In September 2009 to make it a more effective and open body and it was mandated to put in place a robust and in-depth peer review mechanism. The aim is to safeguard the commitments jurisdictions made and to respond in particular to the G20 call for rapid and effective implementation of the standards of transparency and exchange of information.

All members of the Global Forum as well as jurisdictions pertinent to the effort of the forum are reviewed which is embarked on in two phases. During Phase 1 reviews, evaluation of the quality of a jurisdiction’s legal and regulatory framework for the exchange of information. In Phase 2 reviews, each essential element is rated as “compliant”, “largely compliant, “partially compliant”, or “non-compliant”. In addition, a jurisdiction that has completed both Phase 1 and Phase 2 reviews is given an overall rating, judging the general level of compliance with the standard.

Given the serious nature of the work and the backing both of the G20 and OECD failure to conform is not viewed as a choice. Although the Forum has no ability to levy sanctions retaliation by individual countries or grouping of counties certainly is possible if a country is considered not to be cooperating with, not having the legal framework in place (a la FATCA), providing information, or has been given a non-compliant rating after review. Let us learn the lessons from FATCA and address our international commitments to being ready for Global Forum on Transparency and Exchange of Information for Tax Purposes and all other international commitments. Let us debate the issues and ensure that our people’s interest is firmly secured and not rush to pass legislation at the last minute. What really are our representatives doing?