Bermuda's treaty negotiating team recently successfully negotiated and signed the Island's 19th Tax Information Exchange Agreement (TIEA). A TIEA is an agreement between two or more countries to assist each other in combating tax fraud and evasion, and in administering and enforcing their domestic tax laws.

The Island has signed TIEAs with Japan, France, Germany, United Kingdom, United States, Australia, Ireland, New Zealand, the Netherlands, the Nordic Group (including Denmark, Finland, Iceland, Norway, Sweden and their associated territories the Faroe Islands and Greenland), Netherland Antilles, Aruba and Mexico.

Bermuda's treaty negotiators recently concluded negotiations with India on a TIEA, and are working on concluding negotiations with other countries, too.

Over the next few months, I will write periodically about these international agreements, and discuss their impact on the people and businesses of Bermuda. I will address topics ranging from where these standard agreements originated, what they mean for us all, how you should proceed should you be requested to provide information, and more. I will also explain why it is important that Bermuda continue to take a proactive and positive approach to the world of TIEAs.

The purpose of TIEAs is to promote international cooperation in tax matters through the exchange of information. Each TIEA identifies what information is "foreseeably relevant" to these endeavours, and sets how much information is to be exchanged between participating countries.

TIEAs are not new, and have not been thrust upon us without consultation, or without benefits to participating jurisdictions. In 1998, the Organisation for Economic Co-operation and Development (OECD) identified a lack of transparency and co-operation amongst countries as a key criterion in determining harmful tax practices. As a result, the OECD Global Forum Working Group was established and tasked with creating a standard agreement to assist in establishing effective systems of tax information exchange between nations. The result was the creation of the OECD Model Agreement for Tax Information Exchange, now commonly referred to as the OECD Model TIEA.

Over time it was acknowledged that the terms of the OECD Model TIEA should not result in business leaving jurisdictions that are committed to negotiating and implementing such agreements. It was also agreed that measures needed to be implemented to defend the integrity of each country's tax system against those jurisdictions unwilling to cooperate. A result of this approach was the April 2009 creation of the 'White', 'Grey' and 'Black' lists, which the OECD used to measure and indicate a jurisdiction's level of cooperation in relation to the OECD proposals.

The OECD announced that offshore business centers must sign 12 OECD compliant TIEAs in order to earn 'White List' status with the organisation. Bermuda, already ahead of the game, was able to act quickly in signing off those TIEAs already under negotiation and begin and complete negotiations with other nations to exceed the 12 required. The result was that the Island earned 'White List' status in June 2009, indicating our commitment to the OECD's internationally accepted standards of transparency and co-operation. The TIEAs entered into by Bermuda are all OECD compliant for the purposes of the OECD initiative on harmful tax practices.

When the OECD and G20 nations announced their clampdown on harmful tax practices in April 2009, there was much speculation that their objective was to "close down" offshore jurisdictions. Although some have opportunistically pushed such rhetoric, detailed scrutiny of the proposals illustrates that onshore jurisdictions only sought to close down the practices of onshore criminals.

The Bermudian treaty team has taken a proactive and leading approach to negotiating and developing TIEAs. It is vital that we continue with this, in order to show the world how legally sound and well regulated we are, while taking every opportunity to influence the direction of global political policy that has an effect on the foundation of our international reputation.

Attorney Steven Rees Davies is an Associate and a member of the Corporate Finance Team within the Corporate and Commercial Practice Group at Appleby. A copy of Mr. Rees Davies' column can be found on the Appleby website at www.applebyglobal.com.

This column should not be used as a substitute for professional legal advice. Before proceeding with any matters discussed here, persons are advised to consult with a lawyer.