By Staff Reporter
CYPRUS and four other jurisdictions have once again been put in the spotlight for their poor record on tax transparency and information exchange, with a senior official from an international organisation suggesting that this could turn big business away.
Luxembourg, Cyprus, the British Virgin Islands, Switzerland and the Seychelles do not meet international standards on tax transparency, potentially putting investments in the countries at risk, a global tax forum said yesterday.
The five either failed to share taxpayer information with other countries or to gather information on beneficial ownership of corporate entities registered on their territory, or both, said the Global Forum on Transparency and Exchange of Information for Tax Purposes.
Cyprus was ruled non-compliant on ensuring reliable accounting records are kept and giving authorities power to obtain information under an exchange of information request.
Pascal Saint-Amans, director of tax policy at the Organisation for Economic Co-operation and Development (OECD), which oversees the forum, said big international companies, banks and agencies may now think twice about investing through these jurisdictions.
“It is a question of reputation… There will be pressure on companies to explain why they are doing business in jurisdictions which are not clean from a Global Forum perspective,” he said.
The Group of 20 leading economies, which has asked the OECD to lead efforts on curbing international tax evasion and avoidance, has said it wants to put pressure on “non-cooperative jurisdictions”.
Luxembourg, which EU sources said is under investigation by the European Commission for tax deals it has cut with major multinationals, said it considered the rating to be “excessively harsh”.
It said in a statement that a “very limited number” of its responses to requests for information had been considered to be unsatisfactory.
The Financial Secretary of the British Virgin Islands, Neil Smith, said the rating did not accurately reflect the current practices in the BVI since 2012.
Cyprus and Seychelles government representatives did not respond to requests for comment.
Earlier this year, German politicians demanded improved transparency in Cyprus’ banking sector, long seen as having weak controls against money laundering, as a condition for providing bailout funds. The island’s banking sector was subsequently decimated after the EU decided to seize deposits to recapitalise banks.
Luxembourg, Cyprus, the Seychelles and the BVI failed the test because the legislative structures they put in place did not function well enough, Saint-Amans said.
Switzerland failed because it did not have the required legislation facilitating tax co-operation in place.
Mario Tuor, spokesman for the Swiss State Secretariat for International Finance, said Switzerland hoped to have the required legislation in place shortly and to be in a position to be deemed compliant with the international standards next year.