Offshore Survey – September 2004 by Christopher Owen
Tax administrations to create joint operational unit The tax administrations of the UK, the US, Australia, and Canada, have entered discussions to create a joint operational unit to increase cooperation in tackling “abusive tax transactions”. The commissioners of the four tax administrations agreed to meet in Washington to discuss the launch of the joint task force. The office said setting up a joint task force would help the four countries to: share expertise, best practices and experiences in the field of tax administration to identify and better understand abusive tax transactions and emerging schemes, as well as those who promote them; and exchange information about specific abusive transactions and their promoters and investors under existing bilateral tax treaties. “While tax administrations operate primarily within their own borders, many abusive tax transactions employ strategies that cross borders and many of the promoters of these transactions operate globally without regard to national boundaries,” the Australian taxation office announced in March.Tax survey finds global trend of decreased tax rates persists Corporate tax rates, on average, have continued a general trend downwards, according to KPMG’s annual survey. The 30 member countries of the OECD had an average corporate tax rate of 29.96% in 2004, a fall from 30.9% in 2003. EU member countries had an average tax rate of 31.32%, compared to 31.84% in 2003.Cyprus and Ireland had the lowest corporate tax rates among 69 jurisdictions surveyed. Cyprus’ corporate tax rate was 10% and 15% depending on the amount of a company’s chargeable income. Ireland’s corporate tax rate was 12.5% although a 10% rate still applied to certain active trading income from defined existing manufacturing companies and the qualifying income of International Financial Services Centre and Shannon-based companies. The special rate will expire between 2003 and 2010. Costa Rica had the largest reduction in taxes, by 16.7% from 2003 to 2004, giving the country a corporate tax rate of 30% (36% in 2003). Hong Kong increased its rate to 17.5% in 2004 from 16% in 2003 but remained the Asian-Pacific jurisdiction with the lowest corporate tax rate. Singapore has reduced the general corporate income tax rate to 20% on income from the 2004 financial year onward.Turks & Caicos court permits assistance to overseas regulators The US Securities & Exchange Commission (SEC) was an overseas regulatory authority within the meaning of the Overseas Regulatory Authority (Assistance) Ordinance 2001 (the Ordinance) and could be assisted by the Financial Services Commission (FSC). So held the Supreme Court of the Turks & Caicos islands (TCI) in Muir Woods Investment Group v The Licensing Committee of the FSC,. The SEC had sought the assistance of the FSC to obtain documents and information regarding a number of international business corporations (IBCs). Details of the directors, officers and shareholders of TCI international business corporations are not provided to the TCI Companies Registry, and are not a matter of public record. The FSC wrote to the company managers of the IBCs concerned, citing the Ordinance and requesting that they disclose the information, including details of the directors, officers and beneficial owners. The IBCs challenged the request on the basis that the SEC was not a qualifying overseas regulatory authority under the Ordinance and that, even if it were, the Ordinance did not permit details of the owners of IBCs to be disclosed in the manner sought. The court found that the term “overseas regulatory authority” included any foreign authority exercising such functions and held that the SEC did qualify and could be assisted by the FSC. It also held that the Ordinance overrode the Confidential Relations Ordinance and the confidentiality provisions of the Companies Ordinance. The FSC was therefore entitled to demand and be given the information sought, and to pass it on to the SEC. Although the point was not at issue in the case, the court emphasised that the competent authority had to be satisfied, before it could assist, that the assistance was not requested by the overseas regulatory authority for the purposes of any functions directly or indirectly relating to assessing, imposing or collecting tax.