Ratification of the Agreement between the Government of Jersey and the Government of the Isle of Man for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income.

STATES OF JERSEY

RATIFICATION OF THE AGREEMENT BETWEEN THE GOVERNMENT OF JERSEY AND THE GOVERNMENT OF THE ISLE OF MAN FOR THE AVOIDANCE OF DOUBLE TAXATION AND THE PREVENTION OF FISCAL EVASION WITH RESPECT TO TAXES ON INCOME

Lodged au Greffe on 3rd April 2013 by the Chief Minister

STATES GREFFE

2013   Price code: C  P.46

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to  ratify  the  Agreement  between  the  Government  of  Jersey  and  the Government of the Isle of Man for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income, as set out in Appendix 1 to the report of the Chief Minister dated 15th March 2013.

CHIEF MINISTER

REPORT

Background

1. In February 2002, Jersey entered into a political commitment to support the OECD 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 some 120 jurisdictions are now 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,  Jersey  and Singapore.
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. There  are  occasions  when  an  approach  is  made  to or  received  from  a jurisdiction that is not an EU, OECD or G20 member expressing a wish to enter  into  the  negotiation  of  a  tax  information  exchange  agreement.  In accordance with the terms of reference of the peer review process set by the Global  Forum,  jurisdictions  are  required  to enter  into  a  tax  information exchange agreement with any jurisdiction that considers itself to be a relevant partner.  The views  of  the  finance  industry  on  the  extent  to which  a  tax agreement with the jurisdiction concerned would be supportive of business development  are  also  taken  into  account  when  deciding  what  degree  of priority to attach to the negotiations.
5. The international tax information exchange standard can be met through either a Tax Information Exchange Agreement (TIEA) or a Double Tax Agreement (DTA). The advantage of a DTA is that it offers benefits to individuals and the business community through the avoidance of double taxation or reduced rates of withholding tax, in addition to providing for exchange of information to the international standard. However, the majority of jurisdictions with whom the Island  has  sought  to  negotiate  an  agreement  have  not  been  prepared  to consider a DTA on the grounds that they would derive little, if any, benefit from such an agreement because Jersey is a zero tax jurisdiction.
6. The latest position in respect of the programme of negotiating tax agreements in attached as Appendix 2 to this report. A total of 31 TIEAs and 7 DTAs have now  been  signed,  of  which  24 TIEAs  and  3 DTAs  are  in force.  Almost without exception, 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.

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 with the EU, OECD and G20 member jurisdictions. Agreements have been signed, or negotiations have been completed or are well  advanced,  with  25  of  the  27 EU member states,  33  of  the  34 OECD members and 17 of the 19 G20 countries (the 20th member of the G20 is the European Union).
8. Jersey is party to the Peer Review process of assessment of compliance with the  international  standards,  and  a  report  of  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 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  practices  to  date  have  demonstrated  a responsive and co-operative approach".

The Agreement with the Government of the Isle of Man

9. The Agreement entered into with the Government of the Isle of Man ("the Agreement") is a continuation of the ongoing programme of entering into tax agreements to the international standard with relevant partners.
10. The Agreement is attached as Appendix 1 to this report. The Agreement isin line with the OECD Model Tax Convention and provides for the avoidance of double taxation to facilitate exchange of goods and services and movement of capital,  technology  and  people.  The Agreement  also  makes  provision  for information exchange to the agreed international standard.
11. The finance industry was consulted and the signing of the Agreement is seen as a significant step in further strengthening the close political and business relationship with the Isle of Man.

Procedure for signing and ratifying the Agreement

12. The Agreement was signed by the Assistant Chief Minister with responsibility for External Relations 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 delegate  the  Assistant  Chief Minister to sign on behalf of the Government of Jersey.
13. 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.
14. The States,  on  15th  June  2010,  adopted  the  Taxation  (Double  Taxation) (Jersey)  Regulations  2010.  The  Schedule  to  these  Regulations  lists  the countries with whom Double Tax Agreements have been entered into. The necessary Regulations to provide for the inclusion of the Isle of Man in the

Schedule will be presented to the States for adoption immediately following the adoption of the ratification proposition.

Financial and manpower implications

15. There are no implications expected for the financial and manpower resources of  the  States  arising  from  the  ratification  and  implementation  of  the Agreement.

15th March 2013

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 or agreed ready for signing:

• Greece
• Republic of Korea
• Spain

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

• Belgium
• Chile
• Hungary
• Kenya
• Lithuania
• Romania
• Slovakia
• Slovenia
• Switzerland

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

• Bulgaria
• Cyprus
• Saudi Arabia

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

• G20 Member States:

– Russia

2. DOUBLE TAXATION AGREEMENTS (DTAs)

1. DTAs signed:

• Malta –

signed January 2010

ratified by Malta February 2010 ratified by Jersey June 2010

in force – 19th July 2010

• Estonia –

signed December 2010

ratified by Jersey March 2011 ratified by Estonia December 2011 in force – 30th December 2011

• Hong Kong China –

signed February 2012

ratified by Jersey May 2012

• Qatar –

signed March 2012

ratified by Jersey May 2012 ratified by Qatar November 2012 in force – 22nd November 2012

• Singapore –

signed October 2012

ratified by Jersey January 2013

• Guernsey – signed January 2013
• Isle of Man – signed January 2013

2. DTAs initialled or agreed ready for signing:

• Luxembourg

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

• Bahrain
• Belgium
• Seychelles

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 20th March 2013