The Global Forum on Transparency and Exchange of Information for Tax Purposes reported on several significant offshore and traditional 'on-shore' jurisdictions yesterday, providing Bahamian professionals a little more insight into how to tackle its own identified record-keeping shortcoming.
Nine peer review reports were released yesterday coming out of the Global Forum Meeting held in Bermuda from May 31- 1 June 2011.  Like The Bahamas, several jurisdictions will have to redress aspects of their record keeping standards, one of the key areas identified as common deficiencies in the nine reports.
"The most common deficiencies identified in the reports related to the availability of information on persons that are represented by nominees and on foreign companies; incomplete accounting information for some forms of limited liability companies and partnerships; and slow responses by requested countries," said a Global Forum press release yesterday.
An initiative of the Organization for Economic Cooperation and Development (OECD), the Global Forum yesterday released the peer reviews for France, the United States, Switzerland, Italy, New Zealand, Hungary, the Isle of Man, Philippines and Singapore.
In September 2010, record keeping requirements were identified as an area for improvement in the Cayman peer review, with similar language to that used in describing the deficiencies recognized for The Bahamas.  News coming out of the Bermuda meeting indicates Cayman may have found a suitable solution to its record-keeping regulations.
"The majority of the jurisdictions previously reviewed say they have changed their domestic legislation following Global Forum recommendations...  The Cayman Islands has ensured that offshore entities now have to keep appropriate accounts," according to the OECD yesterday.
Bermuda's Premier Paula Cox, at the Global Forum news conference to announce some of the outcomes of the meeting, addressed the matter of whether or not jurisdictions with no income tax regime were struggling to meet the record-keeping provision more than income tax-based jurisdictions.
"We don't have income tax and it hasn't been seen that that has been a reason why we would struggle with the whole regime of exchange of information," Cox said.  "There is a competent authority.  You'll know that we have had a long-standing tax convention with the US going back to 1986, and really when jurisdictions or authorities request information we have a documented procedure and we also have a means of giving a turnaround time which is seen as being effective.
"The income tax issue from our perspective in how you monitor and deal with exchange of information hasn't been an impediment."
Bermuda was considered to have met the requirements for record keeping in its September 30th 2010 peer review, though that report noted that aspects of the legal implementation needed improvement.  It was recommended that Bermuda "introduce consistent, binding requirements on all relevant entities and arrangements and maintain reliable accounting records including underlying documentation for a minimum of five years."
In its just-released peer review, the Isle of Man was identified as needing to improve its accounting records standards for limited partnerships, the Forum recommending the maintenance of reliable accounting records including underlying documentation for at least five years.  It also received a recommendation to clarify its disclosure of information to other enforcement agencies with its treaty partners.
Many in the industry anticipated that the United States would run into some challenges over the laws and regulations governing limited liability companies (LLCs) in a number of its states.  The US' peer review did raise matters in respect to the ownership and identity information for single member LLCs and the availability of accounting information for single member LLCs -- where the LLC's business did not require it to file tax returns in the US.  Nevertheless, the Forum marked these areas as meeting the standard, saying "The element is in place, but certain aspects of the legal implementation of the element need improvement."
The forum recommended that the US ensure accounting records, including underlying documentation, are available for all LLCs.
France received a clean bill of health for all of the categories reviewed under Phase 1.  Like the United States, France and the Isle of Man underwent their phase 1 and 2 peer reviews simultaneously.  The phase 1 review looks at the legal and regulatory framework in a jurisdiction, whereas phase 2 looks at the implementation of those laws and regulations.
Recommendations were made to both jurisdictions to improve systems under which the competent authority provides status updates to parties in its network of information sharing agreements.
Switzerland was recognized for the significant change to its approach to information exchange for tax purposes over the last two years, but some deficiencies were identified.
"It has made rapid progress to implement its commitment to the internationally agreed standard.  However, the report notes that in a few areas it still falls short of the standard: Bearer savings books are being phased out but still exist.  In addition, only a limited number of Switzerland's exchange of information agreements meets the standard," according to the OECD.

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