Few people today question regional and global integration's positive impact on the economy and welfare. Unfortunately, globalisation of the capital markets has been shown to lead to increased opportunities for international tax evasion. Besides the negative effects this has on public finances, the standard rules of the market are undermined giving rise to serious consequences for our economies. Tax evasion happens above all in countries with no agreements for information exchange of financial transactions, i.e. tax havens.

In the light of this fact, joint Nordic co-operation under the auspices of the Nordic Council of Ministers began in 2006 with the objective of co-ordinating the Nordic approach for entering into information exchange agreements in tax havens. The project has resulted in the Nordic countries individually signing at least 28 bilateral information exchange agreements as of 9 December 2010. The Nordic countries, together with the United States and France, are the countries in the world which have signed the most agreements on information exchange. The Nordic negotiations are expected to lead to the signing of further agreements in 2011 and 2012.

Background

The OECD (Organisation for Economic Co-operation and Development) has identified about 50 states which have bank secrecy legislation for offshore financial centres. The majority of the larger OECD countries are today actively engaged in negotiations with these offshore financial centres (tax havens) to agree on tax information exchange agreements. These negotiations will focus chiefly on the 35 tax havens which have made a commitment to the OECD to improve transparency and information exchange agreements for taxation.

The objective of signing an information exchange agreement is give the tax authorities insight into the capital investments placed in the tax haven by those liable to taxation. Such agreements can lead to exposure of assets and incomes which have not been declared in the country of residence and can reduce interest in using these tax havens for the purposes of tax evasion.

The design and direction of the Nordic project

With the aim of following up on the OECD's work to combat international tax evasion the Nordic countries decided in June 2006 to begin negotiations with tax havens. In order to strengthen the Nordic negotiating position in relation to tax havens and to keep costs for this negotiation work down, the countries co-ordinate their negotiation work under the auspices of the Nordic Council of Ministers [2]. The Faroe Islands and Greenland also take part in this work.

A steering group made up of representatives from all of the Nordic countries co-ordinates the negotiation efforts. Participants in the steering group are experts with experience from the Nordic countries' finance ministries (Denmark: Ministry of Taxation), as well as many years’ experience in national and international work in the field of tax evasion. The day-to-day work is managed by project manager Torsten Fensby, who worked for ten years with the OECD prior to this project. He has been the chief negotiator in the majority of the 33 undertakings made by tax havens to the OECD.

This is how negotiations are carried out. The project leader and (one or more) representatives from the Nordic countries negotiate with a tax haven and report back afterwards to the steering group. The mandate for the negotiations is stipulated by the steering group which also analyses the proposals presented to the tax haven during the negotiations. The actual information exchange agreement (and other agreements) is, however, for constitutional reasons, entered into on a bilateral basis.

The project has received very favourable attention in the OECD and contributed to strengthening the Nordic position internationally in these matters. The OECD has presented the project as a model for how OECD countries can work together in taxation matters at an international level.

Since negotiations began in spring 2007 the Nordic countries have entered into information exchange agreements with Andorra, Anguilla, Antigua and Barbuda, Aruba, the Bahamas, Belize, Bermuda, the British Virgin Islands, the Cayman Islands, the Cook Islands, Costa Rica, Dominica, Gibraltar, Grenada, Guernsey, the Isle of Man, Jersey, Liberia, Macao SAR, the Marshall Islands, Monaco, Montserrat, the Netherlands Antilles, Samoa, San Marino, St. Kitts and Nevis, St. Lucia, the Turcs and Caicos Islands, St. Vincent and the Grenadines and Vanuatu.

The co-operation is scheduled to last until 2012.

The joint Nordic negotiations are expected to result in more agreements between 2010 - 2012.

Overview of the tax information exchange agreements.