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In-Depth Analysis evaluatingthe legal, political and
institutional framework onoffshore practices related to
tax evasion, money launderingand tax transparency in the
Overseas Countries andTerritories (OCT) of France, asdefined in Annex II (TFEU), and
the relations of France withthese OCTs
Pr. AlexandreMAITROT DE LA MOTTE
Brussel - 2 May 2017
Rédacteur2 May 2017 2
INTRODUCTION
Under the law of the European Union, the French OCTs are:
• St. Barthelemy,
• Saint-Pierre-and-Miquelon,
• Wallis-and-Futuna Islands,
• French Polynesia,
• and the group constituted by the four territories of NewCaledonia (hereinafter ‘New Caledonia’).
Rédacteur2 May 2017 4
INTRODUCTION
DOM ROMDOMANDROM
COM Other UPR OCT
Guadeloupe C C C
Martinique C C
Guyana C C
Reunion C C C
Mayotte C C C
St. BarthelemyC/as.
C
Saint-MartinC/as.
C
Saint-Pierre-and-Miquelon
C/as.C
Wallis-and-Futuna
C/sp.C
French PolynesiaC/sp.
C
New Caledonia C/sp. C
Rédacteur2 May 2017 5
INTRODUCTION
These French OCTs are not completelyindependent or even autonomous:
• They do not have sovereignty;
• Like all French local authorities, they are decentralisedand exercise the powers that the state gives them (andcan take over) within the framework of a unitary state.
French law is governed by a logic that is that ofdecentralisation: the French state remains a unitary statewhich has transferred powers and financial resources to
non-sovereign local authorities.
Rédacteur2 May 2017 6
INTRODUCTION
Territory Population Size GDPGDP percapita
Unemploymentrate
Key economicsectors
Frenchbudgetary aid
St. Barthelemy 9,131 (2012) 24 km²319 million
euros (2010)
35,700euros(2010)
4.3%
Tourism; Buildingsand Public Works;Non-financialmarket sector;trade
2 million euros
Saint-Pierre-and-Miquelon
6,081 242 km²172 million
euros28,327euros
8.7%
PublicAdministrationsand Merchantservices
77 million euros
Wallis-and-Futuna 12,200 142 km²150 million
euros10,100euros
8.8%
Agriculture ; NonMerchant services(education, Healthand publicservices) ; trade
106 million euros
French Polynesia 271,8004 167k
m²4,346 billioneuros (2012)
16,000euros(2012)
21.8% Services; Tourism.1,192 millioneuros
New Caledonia 268,00018 576
km²7,105 billioneuros (2010)
28,931euros(2010)
13.85% (2009)
Mining activities(nickel); trade ;construction ;tourism
1,217 millioneuros
Rédacteur2 May 2017 7
INTRODUCTION
Syllabus:
I / Tax evasion and French OCTs
II / Money laundering and French OCTs
III / Fiscal transparency and French OCTs
Rédacteur2 May 2017 9
I / Tax evasion and French OCTs
1. Lack of data
• Insufficient data
• Awareness of this inadequacy
• Lack of a real reaction from the Frenchauthorities
• Resulting methodological difficulties
Rédacteur2 May 2017 10
I / Tax evasion and French OCTs
2. Factors favouring tax evasion throughcertain French OCTs.
• The low level of direct taxes (St Barth & Wallis-and-Futuna)
• The lack of tax audits (all French OCTs, outsideof Saint-Pierre-and-Miquelon)
Rédacteur2 May 2017 11
I / Tax evasion and French OCTs
3. Factors putting into perspective therisks of tax evasion through French
OCTs
• The tax regimes applicable to non-residenttaxpayers in the French OCTs (double taxation)
• The geographical distances and the difficultiesof access
• The low level of development of localeconomies and banking systems
Rédacteur2 May 2017 13
II / Money laundering and French OCTs
1. The indirect application of Europeananti-money laundering rules in the
French OCTs
• Traditional extension to the French OCTs of EUsecondary legislation on the fight against
money laundering
• Extension to the French OCTs of the mostrecent provisions of European Union anti-
money laundering legislation (Regulation (EU)2015/847; and Directive (EU) 2015/849)
Rédacteur2 May 2017 14
II / Money laundering and French OCTs
2. Critical examination of the effectivenessof the rules applicable within the French
OCTs
• The insufficiency of the reporting ofsuspicions and of the controls
• The lack of data on money laundering in theFrench OCTs
Rédacteur2 May 2017 15
II / Money laundering and French OCTs
3. The need to put into perspective therisks of money-laundering via the French
OCTs
• With respect to banking systems and feasiblebanking operations, the risks are limited
• Given the number of bank accounts opened inthe French OCTs and the amount of bankassets, money laundering practices are
necessarily low
Rédacteur2 May 2017 17
III / Tax transparency and French OCTs
1. A willingness to tax transparencyrespecting the highest standards
• Article L. 114 of the French Code of TaxProcedures: ‘The tax administration may exchange information with the
financial administrations of Saint-Pierre-and-Miquelon, New Caledonia, FrenchPolynesia, the Wallis-and-Futuna Islands and the French Southern and Antarctic
Territories and other local and regional authorities of the French Republicgoverned by a specific tax system, and with states which have concluded withFrance an administrative assistance agreement to combat the tax fraud and tax
evasion’
• Agreements between the French state and theFrench OCT with a view, inter alia, to
organising the exchange of tax information
Rédacteur2 May 2017 18
III / Tax transparency and French OCTs
1. A willingness to tax transparencyrespecting the highest standards
• In practice, the conventions binding the OCTsand the central state comply with OECD
standards
• Sometimes they go even beyond (by offering thepossibility for the state to monitor on-the-spot thereality of operations which have given right to tax
exemptions in metropolitan France; sometimes, the statemay itself impose the taxation of persons settled in St.
Barthelemy but taxed as residents of the state)
Rédacteur2 May 2017 19
III / Tax transparency and French OCTs
2. The regrettable lack of data on theimplementation of tax transparency in
the French OCTs
Rédacteur2 May 2017 20
III / Tax transparency and French OCTs
3. An effective cooperation
• The exemplarity of France underlined by theOECD (OECD, Global Forum on Transparency
and Exchange of Information for Tax PurposesPeer Review France 2013: Combined: Phase 1 +Phase 2, Incorporating Phase 2 ratings, OECD
Publishing, 2013)
• Risk of asymmetry
Rédacteur2 May 2017 21
CONCLUSION
The in-depth analysis of the French situation withregard to tax evasion, money laundering andtax transparency shows that the French OCTspresent little risk for the other Member States
of the European Union.
Rédacteur2 May 2017 22
CONCLUSION
This absence of risk results from three factors:
On the one hand, French OCTs are not fully autonomous and have nosovereignty. In other words, these decentralised authorities arerelatively controlled by the central state, which can, depending on thecircumstances, grant them more or less autonomy. In the areas coveredby this study, it is relatively weak.
On the other hand, the rules which apply in the OCTs are very close to themetropolitan regulations, and therefore to European regulations wherethey exist. Coordination with mainland France is certain. And highstandards are respected.
Finally, neither the economic context nor the infrastructures encourage taxevasion or laundering activities in the French OCTs. In particular, thebanking sector is insufficiently developed to allow locally to engage inthese reprehensible practices.
Rédacteur2 May 2017 23
CONCLUSION
Of course, improvements could be made tocombat tax evasion and money laundering in
the French OCTs:
• In particular, the administrative departmentsresponsible for carrying out control operationscould benefit from more resources. This would
allow for more controls and more data.
• At the same time, local professionals could bemore aware of risks.
Rédacteur2 May 2017 24
CONCLUSION
It follows that the French OCTs can serve as amodel for the OCTs of the other Member States.
If the idea is not to question the competenceand autonomy of the latter, it would perhaps berelevant that, like the French OCTs, regulations
close to European regulations and Europeanstandards apply there in the field of the fight
against money laundering and of administrativecooperation.
Alexandre MAITROT DE LA MOTTE
Professor at Paris-Est Créteil UniversityAssociate Vice President, in charge of legal
affairs & communicationVice Dean of the Law Faculty
Head of the Public Law departmentDirector of the Research Center Marchés,
Institutions, Libertés (EA 7382)Director of the Master program Droit Fiscal,
spécialité fiscalité appliquée
61, avenue du Général de Gaulle94010 Créteil Cedex
Faculté de droit