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Exchange of Information9

A central thrust of the Report is to launch an attack on the present exchange of

information or lack thereof with the offshore sector. The OECD has made it a distinct

requirement that in order for the offshore centers to maintain a level of cooperation from

its members there must be a massive increase of exchange of information treaties or


This particular recommendation has sent shivers throughout the offshore industry for

several reasons. Several of the countries identified by the OECD have previously enacted

legislation specifically detailing the circumstances under which the veil of confidentiality

may be pierced11. Moreover; there is adequate case law12 illustrating the use of such

legal assistance treaties. The judiciary has also played a major role and within the

offshore centers has overwhelmingly rejected breaching the confidentiality provisions of

the law where the revenue collectors of the contracting state are at best only capable of

proving a “fishing expedition13”against the alleged individual. In the case of Re Grand

9 See in particular The OECD Report on Harmful Tax Competition An Emerging Global Issue Paragraph 64 page 29…” The ability or willingness of a country to provide information to other countries is a key factor in deciding upon whether the effect of a regime operated by that country has the potential to cause harmful effects.”

10 Ibid page 46 “Recommendation concerning greater and more efficient use of exchanges of information that countries should undertake programs to intensify exchange of relevant information concerning transactions in tax havens….”

11 See the laws between the Untied States and Bermuda, Bahamas, Cayman and British Virgin Islands all of whom have a Mutual Legal Assistance Treaty

12 Hence, tax regulators have sought other means to have information released, In this regard see Mackinon v Donaldson Lufkin Jenrette, Judgement of Nov. 5, 1985, Chancery Division, London (court declined to exercise jurisdiction over Bahamian bank account in alleged fraud case and quashed subpoenas) Clinch v Inland Revenue Commissioners (1974) Q.B. 512

13 Cayman Islands Financial Secretary George McCarthy has emphasized that the Caymanian government will work with the OECD in order to produce an administratively workable procedure for the release of

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