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Monthly Archives: July 2016

US Escapes the OECD's Blacklist of 'Non-Cooperative Jurisdictions”

The Organization for Economic Cooperation and Development has asked the G20 governments to approve its proposed three-step formula for deciding which international financial centers are to be blacklisted as non-cooperative.

The formula, presented at the G20 meeting in Chengdu on July 23-24 , is a response to a request from the previous G20 meeting in Washington in April this year. A draft version was circulated to interested parties last month, though not actually published. The final version appears to be little changed from that draft.
The basic criterion to avoid blacklisting is to comply with at least two out of the following three 'objective' criteria:
  1. A 'largely compliant' rating on international exchange of tax information;
  2. A commitment to implement the OECD Common Reporting Standard (CRS) by 2018;
  3. Having signed the OECD multilateral tax assistance convention.

The G20 countries said at their April summit that they will consider 'defensive measures' against non-cooperative jurisdictions if progress as assessed by the OECD's Global Tax Transparency Forum is not made.

However, there is growing concern that the use of this formula will avoid blacklisting the US, despite the country's failure to adopt the OECD's Common Reporting Standard for automatic disclosure of bank account information.
  • Instead of CRS, the US is using its own reporting system, developed under the Foreign Account Tax Compliance Act.
  • The OECD's report to the G20 appears to turn a blind eye to the fact that the FATCA system is less stringent than CRS, and relies on US undertakings to converge its reciprocal automatic disclosure regime towards CRS in due course.
  • Washington's rejection of CRS in favor of FATCA has drawn criticism, notably from the well-known campaigning group Tax Justice Network. It described the OECD proposal as potentially a 'whitewash'. See our post US The New Tax Haven?
  • 'The USA should not be among the jurisdictions named as being committed to implementing the CRS because the USA refuses to implement the CRS', TJN says.

TJN also accuses the OECD Global Forum's peer reviews, which underlie the assessments of each jurisdiction's compliance, of being politically biased.

'For instance, there are US legal entities (single-member limited liability companies without US-sourced income) for which there is no ownership information whatsoever in the USA, yet the Global Forum deems the US to be largely compliant', it says. Similarly, it points out, Germany and Switzerland both allow bearer share companies, but Germany's company ownership regime is rated largely compliant, while Switzerland's bearer shares are rated as non-compliant.

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OECD (Tax report to G20, PDF file)

Tax Justice Network



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101 countries now committed to OECD CRS

According to an OECD announcement on May 12, 2016 global tax transparency forum, Panama, Vanuatu, Bahrain, Lebanon and Nauru have now formally committed to share financial account information automatically with other countries using the Common Reporting Standard (CRS).

This raises to 101 the number of jurisdictions committed to implement information sharing in accordance with the OECD's Common Reporting Standard.

  • In a statement on 9 May, Kosie Louw, Chair of the OECD's Global Forum on Transparency called on all countries to put in place domestic legislation and to sign and ratify the multilateral Convention on Mutual Administrative Assistance in Tax Matters by the end of August 2016.
  • The OECD has also announced that Canada, Iceland, India, Israel, New Zealand and the China have signed the Multilateral Competent Authority agreement for the automatic exchange of Country-by-Country reports, bringing the total number of signatories to 39 countries.
The table below summarises the intended implementation timelines of the new standard. JURISDICTIONS UNDERTAKING FIRST EXCHANGES BY 2017 (55)
Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Curaçao, Cyprus, Czech Republic, Denmark, Dominica, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Netherlands, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Trinidad and Tobago, Turks and Caicos Islands, United Kingdom
Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu
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Tax Havens Coming Clean and Becoming Transparent


The Cayman Islands has gazetted the Confidential Information Disclosure Law 2016, thereby repealing the Confidential Relationships (Preservation) Law with immediate effect as of June 2016. The old law was seldom used but was often cited as evidence of Cayman's secrecy. The new law returns liability for breach of confidence to the common law and rules of equity, as in the UK.

The Confidential Relationships (Preservation) Law was originally enacted in the 1970s, when Cayman as a financial centre was in its infancy. In essence, all it did was to overlay criminal penalties on disclosures of confidential information that in most cases would have been actionable by civil proceedings in any event.

Cayman’s often misinterpreted Confidential Relationships (Preservation) Law, commonly referred to as the Secrecy Law, has been repealed and replaced with the Confidential Information Disclosure Law.

However, in the 40 years of its existence, no-one was ever prosecuted, and the only provision that was commonly used was section 4, which enabled a person who intended or was being required to disclose confidential information in evidence in proceedings (whether in Cayman or elsewhere) to apply for the approval of the Court to do so.
Nonetheless, its existence was often relied upon, in particular by those pursuing a political agenda hostile to international financial centres, as evidence that Cayman was a ‘secrecy’ jurisdiction. For this reason and because it was notoriously difficult to interpret with certainty, its repeal is to be welcomed. 

Financial Services Minister Wayne Panton, who tabled the bill in the Legislative Assembly on Friday (24 June), pointed out that the government has the “complete support of industry” on the repeal of the Confidential Relationships (Preservation) Law and its replacement with the Confidential Information Disclosure Law.

Premier Hon Alden McLaughlin, in May, announced that as part of Cayman’s commitment to tax transparency it would repeal the Confidential Relationships (Preservation) Law.

His statement followed Cayman’s commitment to join the UK-led initiative to develop a new global standard for the automatic sharing of beneficial ownership information.

The Premier also said that in September the new Data Protection Law will be introduced “acknowledging privacy as a basic human right.”

The new data protection legislation, he said, is one that is “on par with what is in place in the European Union.”

Mr Panton, speaking to the new Confidential Information Disclosure Law on Friday, explained that it will further clarify “the local competent authorities to whom information can be disclosed and in what circumstances” and removes the current criminal sanction for breach of disclosure of confidential information while maintaining the common law civil liability.

The new law, he assured, will continue to protect confidential information and “will enhance the profile and record of transparency of the Cayman Islands by clarifying one of the core objectives” of the Confidential Relationships (Preservation) Law.

Under the law disclosures by persons who owes a duty of confidentiality, for example corporate service providers, in cases of compliance with court orders, compliance with an order made by the Cayman Authority pursuant to the Mutual Legal Assistance (United States of America) Law (2015 Revision) order or search warrant made by the Central Authority pursuant to the Criminal Justice (International Cooperation) Law (2015 Revision) “shall not constitute a breach of the duty of confidence and shall not be actionable at the suit of any person.”

The law also sets out how the court shall treat with the giving of evidence of confidential information, including documents, in court proceedings and by order.


Panama has informed the Organization for Economic Co-operation and Development (OECD) of its intention to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. It is considered by the OECD to be the most comprehensive multilateral instrument available amongst jurisdictions for all forms of tax cooperation to tackle tax evasion and avoidance, including the exchange of information on a government-to-government basis.
The Multilateral Convention on Mutual Administrative Assistance in Tax Matters was jointly developed by the OECD and the Council of Europe in 1988 and amended by Protocol in 2010.
Since 2009, the G20 has consistently encouraged countries to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. More than 90 countries (including the U.S.) currently participate. The complete list of participating countries may be found
Panama intends to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters. The Panamanian Ministry of Foreign Affairs announce Panama's intention to sign the Multilateral Convention on Mutual Administrative Assistance in Tax Matters on its
website. The OECD also issued a press release indicating as such.
Panama's participation in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters would not require the automatic exchange of information, clarifies the Panamanian Ministry of Foreign Affairs. Instead, it would extend Panama's network to the almost 100 countries who have already signed the agreement. Whether or not Panama automatically exchanges information with any of these countries is in Panama's discretion.
In the name of tax transparency, the country recently committed to implementing the OECD Common Reporting Standard, shortly after the leak of the so-called controversial “Panama Papers” see our post The Saga of the "Panama Papers" Has Only Just Begun!.  


The Inland Revenue Authority of Singapore has issued an e-Tax Guide on the territory's general anti-avoidance rule in Section 33 of the Income Tax Act.

The guide, issued on July 11, 2016, explains the three tests to determine whether the GAAR should apply.

It includes examples on actionable avoidance arrangements, namely: the circular flow or round-tripping of funds; the creation of more than one entity for the sole purpose of obtaining a tax advantage; changes to the form of business entity for the sole purpose of obtaining a tax advantage; and the attribution of income that is not aligned with economic reality.

The IRAS clarified that the guidelines and accompanying examples in the guide are not meant to be exhaustive and that arrangements not described in the guide should not be taken as falling outside the ambit of Section 33 of the ITA, or as acceptable to the tax authority.

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The Cayman Reporter



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State Income Taxes Play a Role in Free Agency

7th Circ. Overrides Late Lawyer's Payroll Tax Abatement preview image

According to Law360, The free agent signing periods in the NBA this month saw players inking huge contracts, but while team names and deal numbers dominated the headlines, experts say the tax implications of those moves often play an unheralded but critical role in determining where the leagues’ stars call home.

In one of the biggest free-agent signings of the NBA’s offseason free agency, star forward Kevin Durant chose to leave the Oklahoma City Thunder, the franchise that drafted him out of the University of Texas in 2007, to join the Golden State Warriors, a team fresh off breaking the NBA record for most wins in a season.

The blockbuster two-year deal reportedly worth $54 million instantly makes the Warriors again one of the favorites to win the championship next season, putting Durant in a great position to win his first title, but the move also means Durant goes to California, which has the highest state income tax rate in the nation.

The move made sense to him despite going from a team in Oklahoma with a tax rate of up to 5.25 percent to a team in California where the tax rate for the highest income bracket reaches 13.3 percent, the highest in the nation. He also may be able to minimize his tax burden by delaying establishing residency in California, experts said, particularly over the course of his two-year deal. Residency is a subjective determination with factors that vary state to state, and with the limited NBA schedule and a long off season, he may be able to keep permanent residency in another state or at least delay California residency to net a larger portion of the overall contract.

Still, teams in states with no income tax like Florida, Texas, Washington and now potentially Nevada, as the NHL is putting a team in Las Vegas, know that this can make a difference, and they use it to their advantage, according to Sean Packard, a certified public accountant with Octagon Financial Services who specializes in tax planning and preparation for professional athletes.

While many factors go into an athlete’s decision to sign with a team as a free agent, one of the factors athletes generally take into consideration is the tax implications, as various tax rates of states could significantly affect the value of their deal.

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