Recent initiatives developed by the Organization for Economic Cooperation and Development (OECD) at the recent G20 summit, in co-operation with non-OECD countries, have put the UAE's Offshore centers in a strong position which is likely to see them attract more foreign investments, say experts. The internationally agreed tax standard, as endorsed by G20 finance ministers at the recent summit and by the UN Committee of Experts on International Cooperation in tax matters, requires exchange of information on request in all tax matters, and enforces domestic tax law without regard to a domestic tax interest requirement or bank secrecy for tax purposes. “This is a very positive step to establishing legitimate practices on a global scale,” says Jitendra Gianchandani, managing partner of Jitendra Chartered Accountants and an expert in Business and Financial Consultancy. “The British Virgin Islands, and other offshore centers, are beginning to loose their image; many companies are using these offshore jurisdictions to avoid tax and hide money.” In response to these practices, the OECD placed Costa Rica, Malaysia and the Philippines on its black list of non-cooperative tax centers, after they failed to meet the new standards set out in the G20 summit's crack down on tax evasion. While that is true from some countries, others, particularly the UAE, are set to benefit from the new standards. “UAE offshore authorities have high standards of policies and procedures and are very selective in granting an offshore company license to investors,” said Gianchandani. “Indeed, investors into Dubai have high confidence levels as the UAE is a well regarded country in the international market, on top of it being a 100 percent tax free economy.” Following the G20 summit, the OECD provided a detailed report on progress by offshore centers around the world towards implementation of its internationally agreed standard on exchange of information for tax purposes. The report consists of four parts: Jurisdictions that have substantially implemented the internationally agreed tax standard; tax havens that have committed to the internationally agreed tax standard but have not yet substantially implemented it; other offshore centers that have committed to the internationally agreed tax standard but have not yet substantially implemented it; and jurisdictions that have not committed to implement the internationally agreed tax standard. There are a total of 40 countries on the list, with the UAE coming under the first: a “jurisdiction that has substantially implemented the internationally agreed tax standard.” Gianchandani says the recent crackdown on tax heaven practices will free up otherwise frozen money which is being unutilized, to boost the Economy and solve the problem of the liquidity and cash flow, which has dried up since October 2008. “Apart from that, in future, failure of the global financial system can be avoided,” he continues. “The global financial system will be more consistent and reliable, and can be monitored if all the tax heaven countries apply themselves in bringing-about these fair business practices.” “With the UAE's stringent regulations for banking, especially cash transactions, this is something the country is already practicing and is well ahead of competing offshore centres, therefore companies incorporated in the UAE are not affected by the recent G20 summit and are enjoying the same status.”
