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EDITIONS
Tuesday, 4 June, 2002, 15:36 GMT 16:36 UK
Channel Islands to target tax evaders
Gordon Brown in Brussels on 4 June 2002
Mr Brown hopes to rein in the Isle of Man soon
Guernsey and Jersey in the Channel Islands have agreed to cooperate with a European Union-led clampdown on tax evasion, according to UK Chancellor Gordon Brown.

The offshore bank centres have vowed to introduce laws that will pave the way for the exchange of information about EU citizens' savings.


Those who are not prepared to introduce (exchange of information) will find themselves increasingly isolated against the growing consensus of the international community

Gordon Brown
UK Chancellor
"Jersey and Guernsey have agreed to pursue the same policy being followed by the other 15 member states of the EU," Mr Brown said.

The islands have responded to threats of sanctions if they had refused to improve transparency.

"A year ago a lot of people would have said that was impossible as the dependent territories were thought to be most resistant," Mr Brown said.

So far, efforts to convince the Isle of Man to follow suit have failed, but "good progress" is being made, he said.

Holding back

The UK badly needed to get the territories on board, to help head off the risk of an EU-wide withholding tax on savings by non-residents.

That, the UK government feared, could harm London's lucrative international bond market.

The compromise EU members reached two years ago committed them to improving the transparency of their savings and tax systems.

Combined with efforts to open up tax havens, the intention is to make it easier to tax EU citizens who keep their savings outside their home country.

International information sharing

In February this year, Guernsey and Jersey signed up to an international programme to block tax evasion.

The Caribbean countries of Grenada and St Vincent & the Grenadines also agreed to come on board.

The agreement, under the auspices of the Organisation for Economic Co-operation and Development (OECD), meant they committed to sharing information about suspected tax evasion and improving the transparency of their regulatory systems.

Ahead of signing up, both Jersey and Guernsey had been scathing about the programme, in private calling it an attempt to remove competition from major banking centres.

And like the Isle of Man, have made their commitments dependent on a promise that any state, OECD member or not, which does not sign up in full will be subject to what the OECD calls "defensive measures" - in other words, targeted sanctions.

Reluctant tax havens

The EU has worked for years to convince other financial centres to agree to share information.

These include the United States, as well as Switzerland, Andorra, Monaco, Lichtenstein and San Marino.

EU member state Luxembourg has refused to share information until competing centres such as Switzerland, Andorra, Monaco, Lichtenstein and San Marino, as well as the United States, do the same.

And Switzerland has also abstained from the OECD's efforts, a situation which - along with the reluctance of seven small non-OECD states to sign up - brought a warning from the Chancellor.

"Those who are not prepared to introduce (exchange of information) will find themselves increasingly isolated against the growing consensus of the international community," he said.

See also:

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