Gibraltar added to OECD 'white' list.

One of the key issues arising out of the G20 ‘financial crisis’ summit held in London in April 2009 was an agreement between countries to draw up a black list of uncooperative ‘tax havens’ based on the OECD’s (Organisation for Economic Co-operation and Development) tier system of ranking countries determined by what is seen to be their level of tax transparency. The tiers have been colloquially referred to by a level of shading with the top being ‘white’ and the bottom being ’black’. Gibraltar was initially placed in the second tier being the ‘grey list’. The tier thresholds are differentiated by the number of TIEA (Tax Information Exchange Agreements) entered into by each country.

As a respected EU finance centre that distinguishes itself as an efficient low tax jurisdiction rather than an ‘off-shore tax haven’ Gibraltar from the outset has been determined to expedite its promotion to the White List by entering into at least 12 TIEAs. Gibraltar achieved this promotion on 20th October 2009 a month before the date it had unofficially set itself to execute the requisite number of TIEAs.

Gibraltar’s resolve to encourage and promote financial and regulatory transparency is highlighted by the fact that it focused on signing its initial agreements with the major countries within the OECD rather than (as is the case with a number of other low tax jurisdictions) with smaller finance centres. The Gibraltar government has stated that even though it is now within the top band of countries ‘our offer to sign a TIEA with whatever country wants to sign one with us remains open’ which highlights its commitment to maintain its reputation for being a well regulated, secure low tax jurisdiction.

Currently Gibraltar has signed TIEAs with the United States of America, Ireland, Germany, New Zealand, Australia, United Kingdom, Denmark, Austria, France, Portugal, Finland, Greenland, the Faroe Islands, Belgium, Sweden, Norway and Iceland.

Whilst TIEAs open the door to the sharing of tax information between countries in an attempt to prevent tax evasion their existence which helps to bring an air of transparency can only be seen by Gibraltar (which is one of the few genuinely low tax countries within the EU) as being beneficial.

Furthermore, it is important to note that their terms can only be enforced in certain specific situations. Given that they are bi-lateral agreements they do often contain small variations depending on the requirements of the two contracting parties. However, they are based on the standard TIEA drafted by the OECD. For the purposes of highlighting some of their salient terms reference shall be made to the standard OECD agreement. Arbitrary requests are prohibited thus preventing ‘fishing expeditions’. Amongst other restrictions requests must be specific setting out the identity of the person under examination; they must identify what information is required; set out the tax purpose for which it is sought; and state the grounds for believing that the information requested in held by the requested party or within the requested party’s jurisdiction. Furthermore, the requesting party must be able to show that all avenues available to it in its own jurisdiction have been explored before making a request.

For those practicing legitimate tax planning the TIEAs should cause no fears and their existence can only be seen to benefit Gibraltar’s long term success as they in effect legitimize the conduct of business throughout the EU and beyond.

Author: Charles Melvin / Mark Truman-Davies