French “black list” – St. Kitts and Nevis added

St Kitts and Nevis Prime Minister, Denzil Douglas, has denounced the Federation’s placement on France’s new blacklist of non-cooperative territories. He said that efforts taken by the Federation, and by other OECS countries, to meet international compliance standards relating to their financial services sector, is like “working towards a moving target.”

A statement from the Prime Minister’s Office said: “This blacklisting by France of countries that they claim have failed to cooperate on tax issues has caused tremendous concern for the Federation for a number of reasons.”

“The Federation has concluded negotiations and initialed agreements with 17 countries for the exchange of tax information and double taxation agreements by the end of 2009 and was in a position to sign all of these agreements at that time.”

Douglas commented: ”The Federation was told that we would have to wait until these OECD countries carried out their internal bureaucratic processes before we could be given a date or a venue for signature. We were able to sign eight of these agreements by the end of 2009 and we signed our ninth agreement with the UK in January of this year.”

”It is extremely unfair for St Kitts and Nevis to now be penalized by France for not meeting the required standard of 12 signed tax agreements as we sit and wait for OECD member countries to inform us that they are ready to sign these agreements.”

Douglas further informed that, responding to a call by St Kitts and Nevis and other OECS countries for assistance in getting agreements signed with OECD member countries in a more timely fashion, the World Bank has announced the appointment of a consultant to assist the OECS countries with this process.

“This consultant has actually negotiated with France the text of a Tax Information Exchange Agreement on behalf of the OECS countries which the Federation signed off on last month and we are now awaiting a date for signature of this agreement from the French government. It is therefore surprising that despite this development, France has seen it fit to move ahead of its other G20 counterparts to issue its own blacklist and to announce sanctions with effect from March 1, 2010, which are indeed quite punitive and will completely stagnate any investment by French nationals into the Federation and the OECS region. It is of further concern that countries blacklisted by France, even if they meet the international standard one week later, will remain on this blacklist until January 1, 2011, when this list will again reviewed,” the statement noted.

The statement added that it was based on the fear of situations like this blacklisting by France that in March 2009, the government passed the St Christopher and Nevis (Mutual Exchange of Information on Taxation Matters) Act, No 7 2009, which provides the legal framework for the Federation to give the force of law to Tax Information Exchange Agreements (TIEAs) signed by the Federation and allowing the Federation to unilaterally list countries in a schedule to this Act which would be entitled to make requests for tax information to the Federation pursuant to rules which are included in a schedule to this Act.

“These rules are based on the OECD model [TIEA] and are therefore in compliance with the international standard. The reason for the government taking this initiative was firstly to ensure that we would not be hindered by the cost and time involved in negotiating tax treaties to enable us to comply with our international obligations. Our experience in being able to receive dates for the signing of our already negotiated agreements has demonstrated that this fear was in fact justified,” it said.

“The OECD in a publication on its website dated April 21, 2009, entitled ‘Countering Offshore Tax Evasion: Some Questions and Answers on the Project’ clearly stated that the standard for transparency and tax information exchange can be implemented “through bilateral tax treaties or [TIEAs]; by multilateral agreements; or by domestic legislation allowing for the provision of information on a unilateral basis.”

Despite this endorsement of the unilateral mechanism by the OECD in its publication, the unilateral mechanism adopted by the Federation in March of 2009 to facilitate the provision of tax information to countries that make requests to the Federation is yet to be adopted by the OECD as a mechanism for implementation of the standard.

Douglas further noted that the government has been advised that the Global Forum, following an intervention made by St Kitts at the September 2009 Global Forum in Mexico, is now looking into the matter. However, this move to review this mechanism has obviously come a little too late for the Federation and many other OECS countries.

The Federation will be signing a TIEA with six Nordic countries on March 24, 2010, and will at the latest be removed from the OECD “grey list” on that date.

“This being said, we will continue to do our part to advocate for the official recognition of the unilateral mechanism to ensure that in the event that the threshold is again changed in the future, that we will not be in the position we now find ourselves where we are at the mercy of the bureaucracy of OECD countries. We will also continue with our attempts to bring a final conclusion to the negotiations with the countries that we have already initialed tax agreements with and with other countries that we are currently negotiating with,” said the statement.

St Kitts and Nevis has already signed agreements with Monaco, The Netherlands, The Netherlands Antilles, Aruba, the United Kingdom, Denmark, Belgium, New Zealand and Liechtenstein.

Countries the Federation has initialed or concluded negotiations with and are awaiting dates for signature are Australia, Canada, France, Germany, Norway, Sweden, Greenland, the Faroe Islands, Iceland, Finland and San Marino.

Countries the Federation has commenced discussions with about TIEAs but have not yet confirmed the text for these agreements are India, Japan, the Seychelles and the United States.