Minister of foreign affairs of Andorra Gilbert Saboya tells all-andorra.com about the main results of foreign policy of Andorran government in 2015 and its plans for 2016:
Interview: Irina Rybalchenko
Could you please explain the basic activities of Andorra´s foreign affairs ministry in 2015?
We began negotiations on an association agreement with the EU on March 18 in Brussels. Monaco and San Marino- two micro states- also participated in the talks. We started talking about this initiative some 5-6 years ago. In 2011 we got a positive response from the EU regarding new ways to explore a possibility of having closer relationships between Andorra and the EU. Last December all three countries got a negotiation mandate which ensured access to the internal European market. The association agreement with the EU will give Andorra a chance to compete globally. It will also enable Andorra to offer its products and services in Europe. The mandate’s objective takes into account Andorra’s particularities. It is very important for our country with 70, 000 habitants. A very good model of relations between a small country and the EU is Liechtenstein. This country was included into the European economy 20 years ago and developed very successfully. We are collaborating with Liechtenstein authorities. Last year they welcomed our official delegates which came to learn their positive model.
It should be signed within 2 years, I guess. We don’t have a precise date. For Liechtenstein, Norway and Iceland it took 2 years to finish similar negotiations. It’s a work in progress.
This is the main objective of our foreign policy today. We do not pretend to be a full member of the EU. It’s not our agenda and I am sure it’s not an agenda of the EU either. This association agreement is very important. It will provide Andorra with access to the European market, allow Andorra to sell its products and services to more than 700 000 000 people around the EU. Integration with the EU will give Andorra’s people plenty of opportunities to study and work in the EU countries. Andorra’s people need to be more present in other countries to enhance international professional skills.
What is France’s and Spain’s position on this issue?
They are very supportive. The best example of the excellent momentum of our bilateral relationship is the signing of both double taxation agreements. Also, the Spanish prime-minister Mariano Rajoy and the French prime-minister Manuel Valls visited our country last year. In both cases, these were the fist official visits of a Spanish president or French prime minister in Andorra.
What countries have already signed double tax agreements with Andorra? What are the first results?
Double tax agreements are very important for us. The purpose is to avoid double taxation. In the future it will also enhance our services exports as tax on origin is eliminated. Today, a double tax agreement with France is already in place. A double tax agreement with Spain is going to be in place by the end of February 2016. We have signed a double tax agreement with Luxemburg. It has already been ratified by Andorra and Luxemburg’s parliaments and will also come into force very soon.
This year we also signed the agreements with Liechtenstein, Portugal and United Arab Emirates. In November of 2015 we side-signed a double tax agreement with Malta. Cyprus and Estonia are on the way. We have also initiated negotiations with Kazakhstan on the issue.
What impact does a double tax agreement have on the foreign investments flow in Andorra?
We have already had a positive impact since the new foreign investment law (FDI) law was approved in 2012, apart from a double tax agreement. In the past 2 years, new FDI was the equivalent of 2% of GDP on average This figure is only foreign business investments without real estate sector. In 2013 the total growth of GDP was 0.3%, in 2014 it continued increasing to 2.3%. We also expect positive results in 2015. And we think that a double tax agreement network enables us to achieve better results in the future.
At what stage are negotiations on Andorra’s access to the automatic exchange of tax information?
There are 2 parts to this process. The first one is on a global scale. The Organisation for Economic Co-operation and Development (OECD) and Andorra have recently signed a multilateral competent authority agreement, marking a crucial step forward in its commitment to implement automatic exchange of financial account information. This agreement is going to come into force in 2018. The document was signed during a meeting of experts on automatic exchange of information convened by the global forum on transparency and exchange of information for tax purposes in New Delhi, India, in December 2015.
On an individual scale we already had an agreement with the EU on tax related issues. It was signed June 1st, 2005. In accordance with the terms of the agreement, Andorra is obliged to apply the measures, equivalent to the ones provided by the European Union savings tax directive. In 2004 the EU signed similar agreements with 4 other non -EU countries which are important world financial centers: Liechtenstein, Switzerland, Monaco and San Marino. Since then all 5 countries were involved in the negotiations for a development of this framework with the EU specifically on automatic exchange of information issues. By the end of 2015, Andorra has side-signed the agreement on automatic exchange of information with the EU, based on the OECD model. This document should finally be signed at the beginning of February 2016 to make it effective by September 2018
What are your expectations regarding the impact of this process on Andorra’s banks?
Globally, Andorra was known as a country which had banking secrecy. But undoubtedly the financing system of Andorra has had to adapt. Andorra’s banks have already started a new policy related to diversifying its customers base. The main objective is worldwide expansion. I mean expansion not only towards the neighboring markets of France and Spain but also towards Central Europe (in particular, Luxemburg) and Latin American markets. So we can talk about a new business model for the majority of Andorra’s banks. Since Andorra’s banks want to compete globally, they must work on a global level playing field and comply with international transparency standards.
Further on, if Andorra’s banks plan to compete globally, the association agreement with the EU which I have already mentioned will provide them with better access to the market for their products and services, thus better for competitors.
Is the signing of a double tax agreement sufficient to get rid of Andorra’s “tax haven” status?
All international authorities are very demanding on transparency. Andorra faced this situation in the past. We were withdrawn from The Organization for Security and Co-operation in Europe (OSCE) “black list” in 2010. So, we are not considered a “tax haven” by OECD criteria anymore. Moreover Andorra signed a multilateral Convention on Fiscal Cooperation which was within the bounds of the OECD program in 2013. The major elements of the Convention are: the cooperation in taxation issues, the exchange of tax information and protection of taxpayers’ rights.
Now we are talking about automatic exchange of information starting in 2018. It is going to be a big area of development in international tax transparency criterias.
According to international media (the Economust, the Guardian), Andorra is still in the “black list”. Could you comment on the reports?
I know about the so -called EU list of non cooperative jurisdictions which was published this last June. We stated at this time that the noncooperative title of the list did not reflect the reality in terms of cooperation on transparency, as previous comments on OECD development point out. The EU list was based on EU state members’ lists which didn’t use coherent criteria, were not updated (some were from 2010 thus not reflecting the development of our tax framework) or were even incorrect (we were mentioned to be included in the Spanish list which was not the case as confirmed by Spanish authorities). Since then, the EU list has been removed from the EU website, and national lists appeared. Andorra was included in 10 in June 2015. However since then we now only appear on 8 national lists and we expect this situation to continue to be favorable towards us in the near future.
With which countries does Andorra have diplomatic relations and is represented officially?
We are represented in Paris, Madrid, Brussels, Lisbon, Geneva and Strasburg. We also have diplomatic missions in New York which covers bilateral and UN relationships as well as in Vienna to cover OSCE. Andorra also has non-resident ambassadors in Vatican, Liechtenstein, San Marino and Monaco.
Does Andorra have plans to extend its diplomatic ties?
We would like to be represented more in Northern and Eastern European countries, as well as in the Ibero-American area. We are also interested to have our presence in Asian countries. In recent years, we had many official visits to Latin American countries, China and the Emirates to solidify bilateral relationships.
What countries are planning to open embassies in Andorra, in addition to Spain and France?
The number of honorary consuls in Andorra has increased recently. Last year honorary consuls from the Czech Republic, Slovakia, Poland and South Korea for example came to work in Andorra. We support all these initiatives.
Where Andorra is represented on the lists of international social and political organizations?
I could name you the main ones. The most important organizations are the UN and the Council of Europe. It’s also important for us to be a part of OSCE to cover security issues. We are very proud to be a member of “L’organisation internationale de francophonie” and “la Secretaria Ibero-Americana”. Membership in both these organizations is a good asset in terms of diplomacy, economy and education.
In 2016 Andorra la Vella will get the status of Latin American capital of culture. What events are planned?
There are some cultural events, one of them is a concert by the famous Mexican singer Julieta Benegas. But I would like to mention in particular two political events. In September 2016 we will host a working session Ibero-American countries’ ministers of education. So ministers of education or high representatives from all members of La Secretaría General Iberoamericana (SEGIB) will come to Andorra. Education system development is one of Andorra’s top priorities. I guess, it’s a very effective way to deepen our relationships with Ibero-American countries area. After this event, a global summit is going to take place in Cartagena de Indias (Colombia) (it’s scheduled for December 2016). Andorra has also been invited to participate in the global Education First Initiative by Mr Ban Ki-moon, the 8th Secretary-General of the United Nations, after his official visit to Andorra.
The second important political and economic event is a meeting for Central American Integration System (SICA) members in Andorra. This is the economic and political organization of Central American states. SICA’s institutional framework included Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, Dominican Republic, Mexico. Chile, Brazil, China, Spain, Germany and Japan are extra-regional observers. SICA has a standing invitation to participate as observers in sessions of the United Nations General Assembly and maintains offices in the UN headquarters. This event is scheduled for June 2016.
What international peacekeeping and humanitarian projects does Andorra participate in?
We have a cooperation program focused on vulnerable communities. There are 3 key directions: education, childhood and gender, as well as water related issues. Cooperation projects includes involvement in African and South American countries.
What is Andorra’s position regarding the military conflict in Syria. Is Andorra ready to accept refugees?
We spoke to the EU regarding this question and participated in all efforts on solidarity. We are ready to welcome maximum 40 people coming from Syria. It may not seem a lot, but it’s in proportion to our small country. Now we are working with European authorities to proceed with a screening process to be able to have profiles of people who may come here.
Is there a budget for this operation?
No, we will take money from other parts of our general budget. Nobody expected to have this crisis coming in, so there is no specific budget. But I am sure the parliament won´t be against voting on this area specifically if it’s necessary.