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 India.

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 INDIA

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

STATES GREFFE

2012   Price code: C  P.15

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Agreement for the exchange of information and assistance in collection  with  respect  to  taxes  between  the  States  of  Jersey  and  the Government of the Republic of India as set out in the Appendices to the Report of the Chief Minister dated 2nd November 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 negotiation 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 the Republic of India

8. The Agreement entered into with the Government of the Republic of India is a continuation  of  the  ongoing  programme  of  signing  Tax  Agreements  with G20 countries.
9. Attached as an Appendix to this report is –

1. the Agreement for the Exchange of Information and Assistance in the Collection of Taxes. 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 provides, in Article 8, for assistance in the collection of tax claims. This provision is consistent with similar provisions in the OECD/Council of Europe Convention on Mutual Administrative  Assistance  in Tax Matters  which  the  G20,  in its communiqué following the Summit meeting in Cannes in November, encouraged jurisdictions to join. Consideration of the Convention has been initiated on which the finance industry will be consulted;
2. an  Agreement  between  the  competent  authorities  concerning  the interpretation or application of the Agreement for the Exchange of Information and Assistance inTax Collection with respect to Taxes. This Agreement provides that Article 8 of the Agreement referred to in (a) above will not be given effect until certain conditions have been met. That is, assistance in collection of tax claims, as envisaged under Article 8 of the Agreement and in accordance with the procedures to be agreed under Article 12(1) of the Agreement, shall be put into effect only at the earliest of the following dates –

1. when the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters comes into force in respect of Jersey, subject to any reservations entered into on behalf of Jersey in connection therewith; or
2. when  Jersey  starts  giving  administrative  assistance  in collection of tax claims to any other country or jurisdiction.

10. It had been expected that an Agreement with India would have been signed in March 2011 in Delhi. However, this was on the understanding obtained from the Indian authorities that the Article 8 provision would be included in other Tax  Information  Exchange  Agreements  to  be  signed  by  India  with jurisdictions that Jersey saw as its competitors. This proved not to be the case, a matter that arose late in the day, and the decision was taken to withhold the

signature until the arrangements for the implementation of Article 8, subject to certain conditions, were met. This is now the case.

Procedure for signing and ratifying the Agreement

11. The Agreement with the Government of the Republic of India was signed by the Deputy Chief Minister, on 2nd November 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   Deputy  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. In due course, 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 India, 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 expected for the financial or manpower resources of the States arising from the ratification and implementation of the Agreement with the Government of the Republic of India.

2nd November 2011

APPENDIX 1

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