Friday, August 28, 2009

SECRET DEALS PUT CLIENT CONFIDENTIALITY AT RISK

It’s a problem I have never had to face but the whole point of the majority of investors placing their money in off-shore locations is to keep their financial affairs secret, especially from the tax man. Now that confidentiality is at risk, and professionals are being placed in a difficult position, by the Gibraltar Government’s policy of signing tax information exchange agreements in secret.

The pressure is on the Gibraltar Government to sign twelve tax information exchange agreements so that it can be removed from the ‘grey list’ of off-shore finance centres and move on to the ‘white list’. Failure to do so will see sanctions imposed and other actions taken plus of course it would give Madrid another stick to beat Gibraltar with.

However rather than this process being undertaken in full view it is being negotiated and signed in secret. Spain kicked up a fuss when Gibraltar signed a high profile agreement with the USA in London in April ahead of the G20 meeting arguing that the Rock was acting like an independent nation rather than a British colony (which is it no longer meant to be).

Critics argue that the current policy of arriving at accords in secret is merely bowing to Spanish pressure but it is also causing confusion amongst the Rock’s own financial centre. Indeed whilst I receive press releases from the Gibraltar Government on a whole raft of topics I have yet to receive one announcing a tax information exchange agreement.

Recently Gibraltar signed a very one-sided agreement with the German Government – an administration that operates a very aggressive tax collecting regime - but nobody on the Rock knew. German clients of financial institutions in Gibraltar were phoning to ask for information and the staff had to reply they knew nothing. The news was only made public when the German Finance Ministry announced the deal in Berlin. Now the same situation seems to have arisen with Australia.

Gibraltar’s GSLP/Liberal Opposition says it notes that the Australian tax authorities have announced that they have signed a Tax Information Exchange Agreement overnight with Gibraltar.

The Shadow Minister for Financial Services, Fabian Picardo, commented on this development: “We support the execution of Tax Information Exchange Agreements by Gibraltar, but we criticise the fact that the Government is not making timely announcements about these agreements being entered into.

“Following press releases I have previously issued on this matter, reliable reports reflect that practitioners in the finance centre have been caught out advising clients in some jurisdictions with which agreements have been signed because the Government has not announced the fact that it has entered into these agreements.

“There is no reason for the Government not to announce that it has entered into these agreements; especially given that the counterpart jurisdictions are announcing the agreements. Keeping the finance centre here in the dark about these developments serves no purpose and can and is causing havoc for many practitioners.”

I also understand this lack of information puts finance centre professionals in a difficult position. They have a duty of confidentiality to the client, yet now have to supply this confidential information to the client’s government because secret accords have been signed which neither they nor they clients knew about. Hence they could be risking being exposed to legal action from their clients.

1 comment:

'Sancho' said...

Since I wrote the above piece Gibraltar has signed a tax information agreement with the UK. I know not whether the financial centre was aware of it but again the Gibraltar Government has issued no press release. I am also rather puzzled as I understood that UK residents - tax payers with accounts in Gibraltar already had their information sent to the UK.