Ratification of a Double Taxation Agreement between the States of Jersey and the Government of Estonia.

STATES OF JERSEY

RATIFICATION OF A DOUBLE TAXATION AGREEMENT BETWEEN THE STATES OF JERSEY AND THE GOVERNMENT OF ESTONIA

Lodged au Greffe on 24th January 2011 by the Chief Minister

STATES GREFFE

2011   Price code: C  P.7

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the double taxation agreement between the States of Jersey and the Government of Estonia as set out in the Appendix to the Report of the Chief Minister dated 21st December 2010.

CHIEF MINISTER

REPORT

Double taxation agreement (DTA) to be entered into with the Government of Estonia

1. The States are asked to ratify the signed double taxation agreement to be entered into with the Government of Estonia, attached as Appendix 1 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. Since early 2009, over 500 agreements have been 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/DTA negotiations is attached as Appendix 2 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 4 vice-chairs from India, Japan, Singapore and Jersey.
7. 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  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 3 year period. An onsite visit took place at the  beginning  of  June  with  assessors  from  the  Global  Forum  Secretariat,

Denmark and Bermuda, and a draft report on the assessment was considered by the Peer Review Group at the end of November. The draft report, which remains confidential, will be considered by the Global Forum at its meeting at the end of May 2011, and if adopted it will then be published.

Agreement with the Government of Estonia

8. The negotiation of a tax information exchange agreement is seen as a first step in the development of a political and economic relationship with the countries concerned, which in due course will lead to the signing of a full or partial double  taxation  agreement.  However,  whenever  the  opportunity  presents itself, the preference has been to negotiate a double taxation agreement from the outset. Some jurisdictions are reluctant to enter into such an agreement with a zero tax jurisdiction because they cannot see any obvious reciprocal benefit. Other countries, however, are more open to the idea and one such jurisdiction is Estonia.
9. Attached as Appendix 1 to this report is the double taxation agreement signed with  the  Government  of  Estonia.  This  is  the  standard  OECD  agreement between countries to remove double taxation obstacles for the development of economic  relations,  and  so  facilitate exchange  of  goods  and services  and movements  of  capital,  technology  and  people.  It  also  delivers  the  OECD agreed  international  standard  on  tax  transparency  and  exchange  of information.
10. The signing of the double taxation agreement with Estonia is a significant step. Jersey is keen to develop its business relationships with the European Union, and therefore itis considered in the Island's best interests that, through the  double  taxation  agreement  with  Estonia,  Jersey  will  be  further strengthening its political and business relationship with an EU Member State.
11. The finance  industry  fully  supports  the  negotiation  of  double  taxation agreements. Negotiations are underway to sign a further such agreement with Belgium.

Procedure for Signing and Ratifying the DTA

12. The Agreement with Estonia was signed by the Deputy Chief Minister in London  on  21st  December  2010,  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  8th  June  2010,  adopted  the  Taxation  (Double  Taxation) (Jersey) Regulations 2010. The Schedule to these Regulations lists the Double Taxation Agreements being entered into. As further Agreements are entered into, the Regulations need to be amended to include in the Schedule the jurisdiction concerned. The necessary Regulations to provide for the inclusion

in  the  Schedule  of  Estonia  will  be  presented  to  the  States  in  due  course following 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 double taxation agreement with the Government of Estonia.

13th January 2011

STATES OF JERSEY

1. TAX INFORMATION EXCHANGE AGREEMENTS (TIEAs)

1. TIEAs signed:

Note:  Dates in brackets are the expected dates based on latest information from the country concerned.

2. TIEAs initialled/agreed ready for signing:

• Argentina
• Brazil
• Indonesia
• India
• Italy
• Republic of Korea
• South Africa

3. TIEAs  where  negotiations  are  well  advanced  with  a  draft  agreement exchanged:

• Czech Republic
• Greece
• Japan
• Poland
• Spain

4. Jurisdictions contacted from which there has been a positive response and/or initial action has been taken:

• Hungary
• Luxembourg
• Russia
• Switzerland

5. Jurisdictions approached but from whom a formal response is awaited:

OECD Member States:

– Austria

– Slovak Republic

G20 Member States:

–  Saudi Arabia

2. DOUBLE TAXATION AGREEMENTS (DTAs)

1. DTAs signed:

• Malta –

signed 25th January 2010 ratified by Malta February 2010 ratified by Jersey June 2010

in force – 19th July 2010

• Estonia –

signed 21st December 2010

2. DTAs where negotiations are well advanced:

• Bahrain
• Belgium
• Qatar

Enquiries concerning the above should be directed in the first instance to the Adviser –  International  Affairs  in  the  Chief  Minister's  Department; Tel: 44(0)1534 440414; e-mail: c.powell@gov.je  

Adviser – International Affairs 13th January 2011