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Tax Information Exchange Agreements
In
December, 2005, Bermuda's House of Assembly voted
to approve new legislation facilitating the exchange
of tax information with other nations in a bid to
cooperate in the stamping out of international tax
evasion.
The
International Cooperation (Tax Information Exchange
Agreements) Act 2005, was umbrella legislation designed
to give effect to Tax Information Exchange Agreements
with countries in the OECD and the European Union.
The
bill, which was passed in committee and sent to the
Senate, came hot on the heels of Bermuda's sealing
of a TIEA with Australia, which was signed by Finance
Minister Paula Cox and Australian Treasurer Peter
Costello in Washington, DC in November of that year.
According
to Cox, tax exchange agreements would not only distance
Bermuda from its old "tax haven" label, but also boost
trade in financial services and improve commercial
relations.
"As
such it is important to our national economic interest
that Bermuda directly negotiates with such countries,"
she stated.
Ms
Cox revealed that Bermuda was negotiating with the
UK towards the completion of an updated TIEA and was
also in diplomatic contact with Mexico.
According
to Ms Cox, the Australian agreement marked the first
treaty that Bermuda had entered into following a commitment
to ban harmful tax practices five years ago.
The
Australian authorities had recently escalated their
enforcement activities involving offshore transactions,
and had been keen to initiate a tax information exchange
deal with Bermuda after it became apparent that a
significant proportion of funds flowing in and out
of the country were being transmitted through Bermuda.
Talks
between the two governments commenced in May 2004,
with a second round of discussions taking place in
August 2005, before the agreement was officially sealed
later that year.
However,
since Bermuda does not have an income tax, and therefore
does not stand to directly gain from an exchange of
tax information, Mrs Cox indicated that the Bermudian
government pushed for additional clauses that would
result in a "measurable and reciprocal" benefit for
the island, such as closer commercial relations between
the two countries.
According
to Mr Costello, the agreement will not only provide
for full exchange of information on criminal and civil
matters between Australia and Bermuda, but also boost
economic ties between the two.
"These
agreements are an essential tool in Australia's efforts
to reduce offshore tax evasion," Costello explained
in a statement.
Double Tax Treaties
