Ratification of the Agreement for the Exchange of Information relating to Tax Matters between the Government of Jersey and the Government of Japan.

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 JAPAN

Lodged au Greffe on 9th February 2012 by the Chief Minister

STATES GREFFE

2012   Price code: C  P.13

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Agreement for the exchange of information for the purpose of the prevention of fiscal evasion and the avoidance of double taxation with respect to  taxes  on  income  of  individuals  between  the  States  of  Jersey  and  the Government of Japan as set out in the Appendix to the Report of the Chief Minister dated 2nd December 2011.

CHIEF MINISTER

REPORT

Background

1. 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.
2. In  September  2009,  the  Global  Forum  on  Transparency  and  Information Exchange for Tax Purposes, a body of which more than 100 jurisdictions are members,  agreed  a  peer  review  process  to  assess  compliance  with  the international standard. To oversee this process, a Peer Review Group was set up chaired by France, with 4 vice-chairs from India, Japan, Singapore and Jersey.
3. Successive G20 Summits have encouraged jurisdictions to make progress in agreeing,  implementing  and  abiding  by  the  necessary  international Agreements for information exchange. In response, Jersey has maintained an active  programme  of  negotiating  Agreements  with  EU,  OECD  and  G20 member jurisdictions. This has served to enhance the Island's international personality, and generally has helped to engender a more favourable view of the Island amongst the international community.
4. The  latest  position  in  respect  of  the  programme  of  negotiating  Tax Information Exchange Agreements is attached as an Appendix to this Report. A total of 27 Tax Information Exchange Agreements (TIEAs) and 2 Double Taxation Agreements (DTAs) have now been signed, of which 19 TIEAs and 2 DTAs are in force. The delay in bringing Agreements into force is due to the length of time taken by the other parties to the Agreements to complete their domestic procedures for the ratification of the Agreements.
5. 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 countries. 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).
6. Jersey has been party to the peer review process to assess compliance with international  standards,  and  a  report  on  the  assessment  of  Jersey  was published at the end of October 2011. The review concluded that Jersey's domestic laws provide a satisfactory framework for the exchange of relevant information. The Island fully met the Peer Review Group's standard in 6 of the 9 areas under review. Three areas related to legal implementation were assessed as being in place, but with room for improvement. However, the assessors noted that the apparent gaps they identified had not prevented Jersey from engaging in effective information exchange. Nevertheless, changes are being made to the legislation to ensure that Jersey is fully compliant. The assessors said "overall, this review of Jersey identifies a legal and regulatory framework  for  the  exchange  of  information  which  generally  functions effectively  to  ensure  that  the  required  information  will  be  available  and accessible.  Jersey's  practices  to-date  have  demonstrated  a  responsive  and cooperative approach.".

7. The  policy  of  negotiating  TIEAs  or  DTAs  is  supported  by  the  finance industry. The preference of government and the industry is for a DTA, but the majority of jurisdictions with whom negotiations have been undertaken have not been prepared to consider a DTA on the grounds that they believe they would derive little, if any, benefit from such an Agreement.

The Agreement with the Government of Japan

8. The  Agreement  entered  into  with  the  Government  of  the  Japan  is  a continuation  of  the  ongoing  programme  of  signing  tax  Agreements  with G20 countries.
9. Attached as an Appendix to this report is the Agreement for the exchange of information  for  the  purpose  of  the  prevention  of  fiscal  evasion  and  the avoidance of double taxation with respect to taxes on income of individuals. The Agreement provides for the exchange of information on tax matters on request consistent with Agreements signed previously with other jurisdictions and which the States have ratified. The Agreement also includes, in Chapter 3, provisions for the avoidance of double taxation for individuals in respect of pensions, the employment income of those engaged in government service and payments in respect of students or business apprentices.
10. The Agreement will come into force, once both Parties to the Agreement have ratified it, and any necessary legislative steps have been taken.

Procedure for signing and ratifying the Agreement

11. The  Agreement  with  the  Government  of  Japan  was  signed  by  the  Chief Minister  on  2nd  December  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 Council of Ministers authorised the Chief Minister to sign on behalf of the Government of Jersey.
12. The Agreement is now being presented to the States for ratification, following which it will be published and entered into the official record. The Agreement will 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  Government  of Japan  and the relevant  taxes  will  be presented to the States for adoption in due course.

Financial and manpower implications

14. There are no implications expected for the financial or manpower resources of the States arising from the ratification and implementation of the Agreement with the Government of Japan.

2nd December 2011

APPENDIX 1

APPENDIX 2

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:

• Austria
• Brazil
• Greece
• Italy
• Republic of Korea
• Spain

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

• Chile
• Hungary
• Kenya
• Latvia
• Lithuania
• Slovenia

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

• Romania
• Switzerland

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

EU Member States:

Bulgaria

Cyprus

Slovak Republic

G20 Member States:

Russia

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 ratified by Jersey March 2011 ratified by Estonia December 2011 in force – 13th January 2012

2. DTAs initialled/agreed ready for signing:

• Hong Kong China
• Qatar

3. DTAs where negotiations have been initiated/draft agreements have been exchanged:

• Bahrain
• Belgium
• Luxembourg
• Singapore

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

Adviser – International Affairs 23rd January 2012