Ratification of the Agreement for the exchange of information relating to tax matters between the Government of Jersey and the Government of the Republic of Indonesia.

STATES OF JERSEY

RATIFICATION OF THE AGREEMENT FOR THE EXCHANGE OF INFORMATION RELATING TO TAX MATTERS BETWEEN THE GOVERNMENT OF JERSEY AND THE GOVERNMENT OF THE

REPUBLIC OF INDONESIA

Lodged au Greffe on 7th June 2011 by the Chief Minister

STATES GREFFE

2011   Price code: C  P.101

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 Government of Jersey and the Government of the Republic of Indonesia as set out in the Appendix to the Report of the Chief Minister dated 4th May 2011.

CHIEF MINISTER

REPORT

Agreement to be entered into with the Republic of Indonesia 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 Republic of Indonesia 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  to an  agreed international standard with each of the OECD Member States.
3. Progress  globally  on  achieving  the  OECD's  objectives  was  slow  initially because of the absence of a level playing field. However, the number of Agreements  negotiated  and  signed  increased  significantly  after  the  G20 London Summit in April, 2009. Subsequent G20 Summits have continued to encourage  jurisdictions  to make  progress  in agreeing,  implementing  and abiding by the necessary international Agreements.
4. In  September  2009,  the  Global  Forum  on  Transparency  and  Information Exchange  for  Tax  Purposes,  a  body  of  which  some  100 jurisdictions  are members,  agreed  a  peer  review  process  to  assess  compliance  with  the international standards. To oversee this process, a Peer Review Group was set up chaired by France, with 4 Vice-Chairs from India, Japan, Singapore and Jersey.
5. Jersey has maintained an active programme of negotiating Tax Information Exchange Agreements with OECD and G20 members. This has enhanced the Island's international personality, and generally has helped to engender a more favourable view of the Island amongst the international community.
6. The latest  position  in respect  of  the  programme  of  TIEA  negotiations  is attached  as  an  Appendix  to this  report.  A  total  of  21 Tax  Information Exchange Agreements (TIEAs) and 2 Double Taxation Agreements (DTAs) have now been signed, of which 15 TIEAs and one DTA are in force.
7. As a Vice-Chair of the Global Forum Peer Review Group, Jersey has been determined to lead by example, and has attached particular importance to entering into Agreements on tax information exchange with G20 members. Jersey has now signed, initialled or completed negotiations with 17 of the 19 G20 countries (the other member of the G20 is the European Union).
8. Jersey has been actively involved with the process to assess compliance with the international standards. The peer review process is made up of 2 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 3 year period which commenced in March 2010. Phase 2 is concerned with assessing the effectiveness with which standards are being

applied. Most countries will be assessed to Phase 2 as a second stage after the end of Phase 1. However, a number of countries, of which Jersey is one, volunteered to be assessed for both Phase 1 and Phase 2 within the first 3 year period.  Jersey  was  assessed  in  2010  by  a  team  of  assessors  drawn  from Denmark and Bermuda supported by the Global Forum Secretariat. The Jersey report is due to be published following its adoption at the Global Forum meeting at the end of May 2011.

The Agreement with the Republic of Indonesia

9. TheTax Information Exchange Agreement entered into with the Republic of Indonesia is a continuation of the ongoing programme of signing TIEAs or DTAs with all OECD and G20 member countries. Indonesia is a member of the G20.
10. Attached as an Appendix to this report is –

1. TheTax 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 Protocol between the Competent Authorities of the Government of Jersey and the Government of Indonesia concerning the interpretation or  application  of  the  Agreement  for  the  exchange  of  information relating to tax matters.

11. The policy of negotiating TIEAs or DTAs with OECD and G20 member countries is supported by the finance industry. The Agreement with Indonesia is seen by industry as an important step in the development of an economic relationship  with  Indonesia  which  is seen  as  a  future  source  of  business opportunities.

Procedure for signing and ratifying the TIEA

12. The Agreement  with  the  Republic  of  Indonesia  was  signed  by  the  Chief Minister on 27th April 2011 in accordance with the provisions of Article 18(2) of the States of Jersey Law 2005 and paragraph 1.8.5 of the Strategic Plan 2006 – 2011 adopted by the States on 28th June 2006. The Agreement 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.

13. The States,  on  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 are 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 Republic of Indonesia and the relevant taxes will be presented to the States for adoption in due course subsequent to the ratification of the Agreement.

Financial and manpower implications

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 Republic of Indonesia.

4th May 2011

APPENDIX