Global Forum on transparency and exchange of information for tax purposes |18 August 2023
SS Payet and DG Vidot during the press conference (Photo: Louis Toussaint)
Seychelles’ authorities disagree with partially compliant rating
The Seychelles’ authorities strongly disagree with the partially compliant rating given by the Global Forum on transparency and exchange of information for tax purposes in the 2023 exchange of information on request supplementary peer review report (second round) for Seychelles.
Secretary of state of the Ministry of Finance, National Planning and Trade Patrick Payet explained in a press conference yesterday morning at the Liberty House, that the report acknlowdged that Seychelles has made a lot of progress by putting in place the necessary legislatives and implementation of standards, but keeping the rating of Seychelles as partially compliant is not encouraging.
The partially compliant rating which leads to an overall partially compliant status is mainly due to issues related to a specific registered agent who left the country along with its records in 2018.
The departure happened after public disclosures in 2016 concerning documents connected to various service providers engaged in offshore activities, famously known as the ‘Panama Papers’.
These disclosures led to an increase in requests for information exchange from Seychelles. Unfortunately, because this particular registered agent had already left the country and taken its records, the Seychelles authorities could not provide the necessary information to fulfil the requests.
This situation contributed significantly to the current partially compliance rating.
Mr Payet said this means Seychelles is being penalised twice on the same circumstance despite trying its best to gain the required information.
“This decision is based on the tax information that concerns one single registered agent that left Seychelles in 2018, which means the Seychelles Revenue Commission could not submit any information on any demands based on that agent,” he stated.
“When the Global Forum did the evaluation in 2020, Seychelles got the ‘partially compliant’ rating because of that same agent,” he stated.
In addition, Mr Payet pointed out that the Seychelles authorities have been able to provide the required information in the majority of cases.
“For us, it is regrettable that the Global Forum has taken this decision, despite showing the progress we have made. We remain engaged with the Global Forum and other countries on transparency and exchange of information on tax,” he stated.
In a press release issued yesterday, Finance, National Planning and Trade Minister Naadir Hassan stated: “We are proud of the extensive reform programme which we have undertaken thus far, that has shown such a marked positive impact on the effectiveness of the exchange of information, and it is regrettable that despite this, the Peer Review Group (PRG) and Global Fund (GF) have taken a position which will adversely impact our jurisdiction purely on the basis of one legacy matter for which we have exhausted all avenues of recovery.”
The minister added that their main argument for maintaining this rating was based on the fact that between April 2019 and March 2022, Seychelles was not able to provide information about legal ownership in about 26 percent of the information exchange requests and about 35 percent of the requests for beneficial ownership.
“However, these statistics are heavily influenced by the situation with the single registered agent who left in 2018. If we were to exclude the cases related to this agent, Seychelles' success rate for legal ownership is actually over 99 percent, and over 91 percent for beneficial ownership during that same period.
“The assessment criteria states that a partially compliant rating is given if a deficiency is identified that has had or is likely to have a significant impact on information exchange in practice,” explained Minister Hassan.
The release added that during the peer review, the Seychelles authorities had argued that they have already addressed this issue and it is not likely to significantly affect information exchange in the future. Moreover, the significance of this issue has reduced over time, with most of the problems occurring in the first half of the review period. In other words, they believe the problem has been dealt with and that it would not have a big impact going forward.
It is important to note that whilst Seychelles has upgraded on three elements, namely element A2 from non-compliant to partially compliant, element B1 from partially compliant to largely compliant and element C1 from largely compliant to compliant, the main element that affected the overall rating, element A1 which is the availability of ownership and identity information, remained at partially compliant. There is an overall of 10 elements that Seychelles is being assessed against. At the 44th Peer Review Group (PRG) meeting from June 13-16, the Seychelles delegation actively challenged this assessment, in particular in relation to element A1 of the report, which relates to the availability of legal ownership, beneficial ownership and identity information.
“The rating assigned impedes the global efforts towards tax transparency, by failing to adequately consider the progress made by member states, and would not appear to be aligned with the intent of the standard. Seychelles is thus calling for a change in the way the peer review is conducted, urging for greater transparency, consistency and equitable treatment, such that any country – small, big or well-connected – is justly considered. As a country we are disappointed with this rating, especially when during the past few years, a lot has been done to ensure compliance of our jurisdiction,” noted Minister Hassan in the press release.
In her presentation, director general for financial services development division, Odile Vidot spoke about the exchange of information on request (EOIR) and explained that in April 2020, the Global Forum published Seychelles’ Second Round Peer Review Report (‘Second Round Report’) whereby the country’s overall rating was downgraded from largely compliant to partially compliant since the first round of EOIR Supplementary Peer Review assessment in 2015.
The result of partially compliant for element A1 was largely due to statistics on availability of beneficial and legal ownership information in practice, which were predominantly impacted by requests related to international business companies (IBC) formed by one single registered agent which left Seychelles in 2018.
“This also showed us certain weaknesses that we had in the laws and the Seychelles authorities have gone through an extensive reform programme to address the recommendations of this Second Round Report,” stated Ms Vidot.
The legislative reforms include The Beneficial Ownership Act, 2020 which means that the definition of the word beneficial ownership in Seychelles is now in line with international standards. It introduced requirements for all entities, legal persons and legal arrangements in Seychelles to maintain a register of beneficial owners and the information is put on a central database to be easily accessible.
Other laws include the Anti-Money Laundering and Countering the Financing of Terrorism Act, 2020; The Trusts Act, 2021; The Limited Partnerships (Amendment) Act, 2021; International Business Companies (Amendment) Act, 2021; and Foundations (Amendment) Act, 2021.
Other legislative reforms include strengthening supervision (reporting requirements) and monitoring, strengthening enforcement and penalties, streamlining exchange of information processes, implementing a tracking system, building a statistics database, focusing on capacity building both in the administration and of taxpayers, and extending the exchange network to include all relevant jurisdictions.
Sunny Esparon / Press release