Ratification of the Multilateral Competent Authority Agreement on the Exchange of Country-By-Country Reports.

STATES OF JERSEY

RATIFICATION OF THE MULTILATERAL COMPETENT AUTHORITY AGREEMENT

ON THE EXCHANGE OF COUNTRY-BY-COUNTRY REPORTS

Lodged au Greffe on 7th November 2016 by the Minister for External Relations

STATES GREFFE

2016  P.119

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to ratify the Multilateral Competent Authority Agreement on the Exchange of Country-By-Country Reports, signed at Paris on 21st October 2016 under the aegis  of  the  Organisation  for  Economic  Co-operation  and  Development (OECD).

MINISTER FOR EXTERNAL RELATIONS

REPORT

Background

On 16th June 2016, Jersey became an OECD Base Erosion and Profit Shifting (BEPS) Associate and a member of the BEPS Inclusive Framework. The aim of the BEPS project is to reach a globally fair and modern international tax system. At the end of October 2016, the membership of the Inclusive Framework stands at 85 countries and jurisdictions. The membership deliberately includes a large number of participating jurisdictions from the developing world, in addition to OECD and G20 members. As a BEPS Associate, Jersey is therefore able to contribute to the overall development of the BEPS project through policy dialogue and exchange of information – participating on an equal footing with OECD, G20 and many other countries and jurisdictions.

All BEPS Associates are committed to consistent implementation of the BEPS package, including its 4 minimum standards. Implementation of country-by-country reporting (CBCR) under Action 13 is one of the 4 minimum standards. Its purpose is to improve transparency between multinational businesses and tax authorities, and to help identify aggressive tax avoidance. Following industry and public consultations, Jersey has published draft legislation to implement into domestic law the OECD standard for extending the scope of Automatic Exchange of Information (AEOI) to exchange of CBCR between tax authorities by large multinational corporations.

The  Multilateral Competent Authority Agreement (MCAA) is  the instrument that provides for exchange of CBC information between the tax authorities of participating countries. The necessary Regulations to implement the MCAA have been lodged, for approval if the signing of the MCAA is ratified. The draft Regulations (see P.111/2016) provide for the exchange of information with jurisdictions that have signed the MCAA, or any other agreement (e.g. TIEA or DTA) to which Jersey and another participating jurisdiction is a party providing for the automatic exchange of information.

On 21st October 2016, at the OECD in Paris, a further 5 jurisdictions, including Jersey, Guernsey and the Isle of Man, signed the MCAA as the next step in putting BEPS into action. This Agreement – attached as an Appendix to this report – is based on the Multilateral Convention on Mutual Administrative Assistance in Tax Matters which has been signed by some 106 jurisdictions, including many developing countries. Jersey joined the Convention in June 2014. At the end of October 2016, the number of jurisdictions who had signed the MCAA had increased to 49.

In  the  EU,  CBCR  has  been  implemented  through  the  further  amendment  to  the Administrative Co-operation Directive (DAC4) adopted in May 2016. Jersey's draft legislation seeks to place a reporting obligation on large multinational enterprises for accounting periods on or after 1st January 2016 working to the same timetable as the UK and EU Member States.

Jersey's approach to BEPS has been subject to extensive public consultation, in addition to regular discussion with industry groups. A public consultation was issued by the Chief Minister's Department on the Introduction of Country-By-Country Reporting (the "consultation paper") in January 2016. A response to the consultation paper was issued by the Chief Minister's Department to the Consultation on the Introduction of Country- By-Country Reporting (the "response paper") in April 2016. Jersey has co-ordinated its approach carefully with the other Crown Dependencies, leading to all 3 Governments signing the CBC MCAA at the same time.

The introduction of CBC reporting in Jersey represents the latest step in Jersey's implementation of the BEPS programme. It is further evidence of Jersey's longstanding policy  of  commitment  to,  and  leadership  in,  delivering  global  standards  in  tax transparency and exchange of information.

Procedure for signing and ratifying the Convention

The Jersey signing of the MCAA was undertaken by the Chief Minister in Paris on 21st October 2016. The signing was 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 to 2011 (P.40/2006) adopted by the States on 27th June 2006. The Council of Ministers has authorised the Chief Minister, in concurrence with the Minister for External Relations, to sign such Tax Agreements on behalf of the Government of Jersey.

The MCAA is now being presented to the States for ratification, following which it will be published and entered into the official record. The MCAA will enter into force with the making of the Draft Taxation (Implementation) (International Tax Compliance) (Country-By-Country Reporting: BEPS) (Jersey) Regulations 201- which have been separately lodged  au Greffe for adoption (see P.111/2016), which will be debated immediately following the ratification if approved.

Financial and manpower implications

If approved by the States, the ratification of the MCAA and the consequential adoption of  the  draft  Regulations  is  estimated  to  cost  approximately  £100,000  for  the development of reporting software plus the costs incurred in making other provisions that  will  be  shared  with  other  AEOI  requirements.  The  cost  will  be  met  from contingencies.

31st October 2016

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