Ratification of the Agreement for the Exchange of Information Relating to Tax Matters Between the States of Jersey and the Portuguese Republic

STATES OF JERSEY

RATIFICATION OF THE AGREEMENT FOR THE EXCHANGE OF INFORMATION RELATING TO TAX MATTERS BETWEEN THE STATES OF JERSEY AND THE PORTUGUESE REPUBLIC

Lodged au Greffe on 27th July 2010 by the Chief Minister

STATES GREFFE

2010   Price code: C  P.108

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the agreement for the exchange of information relating to tax matters between the States of Jersey and the Portuguese Republic as set out in the Appendix to the Report of the Chief Minister dated 9th July 2010.

CHIEF MINISTER

REPORT

Agreement to be entered into with the Portuguese Republic for the exchange of information relating to tax matters.

1. The States are asked to ratify the signed Agreement to be entered into with the Portuguese Republic for the exchange of information relating to tax matters attached as an Appendix to this report.

Background

2. In February 2002 Jersey entered into a political commitment to support the OECD's tax initiative on transparency and information exchange through the negotiation of tax information exchange agreements with each of the OECD Member States.
3. In April 2009, following the G20 Summit in London, the OECD published a progress report on the jurisdictions implementing the internationally agreed tax standards of transparency and information exchange. Jersey was included in  the  list  of  jurisdictions  that  have  substantially  implemented  the internationally agreed tax standard – what has become known as the "white list" – alongside countries such as the United Kingdom, the United States, Jersey, France, Japan etc.
4. Since April 2009 subsequent G20 Summits have encouraged further progress in  agreeing,  implementing  and  abiding  by  the  necessary  international agreements. In 2009 over 400 agreements were signed where previously only some 45 agreements had been entered into that complied with the current internationally agreed tax standards.
5. To be included on the OECD "white list" in April 2009 Jersey needed to have signed  12  tax  information  exchange  agreements  (TIEAs)  that  met  the international standards. Since that date further agreements have been signed or have been negotiated to the point where they are ready for signing. The latest position in respect of the overall programme of TIEA negotiations is attached as an Appendix to this report.
6. In  September  2009  the  Global  Forum  on  Transparency  and  Information Exchange  for  Tax  Purposes,  a  body  of  which  over  90  jurisdictions  are members, established a peer review process to assess compliance with the international standards. To oversee this process a Peer Review Group has been set up chaired by France with four vice-chairs from India, Japan, Singapore and Jersey.
7. The Peer Review process is made up of two phases. Phase 1 is concerned with an assessment of the laws and regulations in place, and involves an assessment of whether these are sufficient to meet the international standards. All of the Global Forum members will be assessed in this respect over a three year period  from  March  2010.  Phase  2  is  concerned  with  assessing  the effectiveness  with  which  the  standards  are  being  applied.  A  number  of countries of which Jersey is one have volunteered to be assessed for both Phase 1 and Phase 2 within the first three year period, and an assessment of Jersey is currently underway. An onsite visit took place at the beginning of

June  with  assessors  from  the  Global  Forum  Secretariat,  Denmark  and Bermuda, a report on the assessment will be considered by the Peer Review Group in October, and subsequently will be considered by the Global Forum and then published.

The Agreement with the Portuguese Republic

8. The tax information exchange agreement entered into with the Portuguese Republic is a continuation of the ongoing programme of signing TIEAs or DTAs with all OECD and G20 member countries.
9. Attached as an Appendix to this report is –

1. The tax information exchange agreement which is consistent with agreements signed previously with other countries.

The  agreement  provides  for  the  exchange  of  information  on  tax matters on request. However that request has to be formulated in writing  in  the  greatest  detail  possible.  There  can  be  no  "fishing expeditions". The agreement will come into force once the parties to the agreement have ratified it, and any necessary legislative steps have been taken.

2. A joint declaration which recognises that the agreement constitutes a step forward in the global effort to establish an international financial system  that  is  based  on  transparency  and  effective  exchange  of information  in  tax  matters.  The  joint  declaration  also  recognises Jersey's "good neighbour" policy, and the Portuguese Republic has indicated that it will use its best endeavours to ensure that where EU Directives and Regulations concerning the Regulation of Financial Services include provisions referring to the position of third countries, particularly in relation to assessments of equivalence in compliance with EU standards and access to EU markets, Jersey will be treated as fairly and favourably as other third countries.

Of particular interest is the statement in the joint declaration that following the entry into force of the TIEA, the Portuguese Republic and Jersey will continue the dialogue to examine what measures could be  adopted  to  further  enhance  and  broaden  their  political  and economic relationship including the further examination of undesired tax  barriers,  and  the  further  extension  of  the  arrangements  for information  exchange,  namely  through  the  negotiation  of  an agreement for the avoidance of double taxation with respect to certain income of individuals.

3. A memorandum of understanding between the competent authorities of  the  Portuguese  Republic  and  the  Government  of  Jersey  which refers to the allocation costs. Most importantly it also states that upon entry into force of the TIEA and in respect of taxes covered by the Agreement, the Portuguese authorities shall exclude Jersey from the "list of countries, territories and regions with clearly more favourable

tax  regimes",  as  approved  by  Ministerial  Order  No.  150/2004  of 13th February.

Procedure for Signing and Ratifying the TIEA

10. As has been the practice in respect of all of the TIEAs signed and ratified to- date the Council of Ministers has had regard for the views of industry which are very supportive of the programme of TIEA/DTA negotiations in which the Council of Ministers is engaged.
11. The  Agreement  with  the  Portuguese  Republic  was  signed  by  the  Chief Minister on 9th July 2010 in accordance with the provisions of Article 18(2) of the States of Jersey Law 2005 and para 1.8.5 of the Strategic Plan 2006- 2011 adopted by the States on 28th June 2006. The agreement it is now being presented to the States for ratification following which it will be published, entered  into  the  official  record  and  Regulations  will  be  made  for  the Agreement to enter into force when the domestic procedures of both parties have been completed.
12. The States on the 29th January 2008 adopted the Taxation (Exchange of Information with Third Countries) (Jersey) Regulations 2008. The Schedule to these Regulations lists the third countries, and includes the taxes covered by the agreements being entered into. As further agreements are entered into, the Regulations need to be amended to include in the schedule the jurisdiction and the taxes concerned. The necessary Regulations to provide for the inclusion in the schedule of the Portuguese Republic and the relevant taxes are being presented  to  the  States  for  adoption  subsequent  to  the  ratification  of  the Agreement for the exchange of information relating to tax matters.
13. The negotiation of the Agreement with the Portuguese Republic has helped to further  strengthen  the  good  relationship  with  Portugal.  The  ongoing programme  of  negotiating  agreements  with  OECD  and  G20  members continues to enhance the Island's international personality, and generally has lead to a more favourable response to the Island amongst the international community.
14. There are no implications for the financial or manpower resources of the States arising from the ratification and implementation of the agreement with the Portuguese Republic.

16th July 2010

APPENDIX