Faroe Islands
This publication contains the 2023 Second Round Peer Review on the Exchange of Information on Request for the Faroe Islands.
Under BEPS Action 14, members of the OECD/G20 Inclusive Framework on BEPS have committed to implement a minimum standard to strengthen the effectiveness and efficiency of the mutual agreement procedure (MAP). The MAP is included in Article 25 of the OECD Model Tax Convention and commits countries to endeavour to resolve disputes related to the interpretation and application of tax treaties. The BEPS Action 14 Minimum Standard has been translated into specific terms of reference and a methodology for the peer review and monitoring process. The peer review process is conducted in two stages. Stage 1 assesses countries against the terms of reference of the minimum standard according to an agreed schedule of review. Stage 2 focuses on monitoring the follow-up of any recommendations resulting from jurisdictions' Stage 1 peer review report. This report reflects the outcome of the Stage 2 peer monitoring of the implementation of the BEPS Action 14 Minimum Standard by the Faroe Islands.
Under Action 14, countries have committed to implement a minimum standard to strengthen the effectiveness and efficiency of the mutual agreement procedure (MAP). The MAP is included in Article 25 of the OECD Model Tax Convention and commits countries to endeavour to resolve disputes related to the interpretation and application of tax treaties. The Action 14 Minimum Standard has been translated into specific terms of reference and a methodology for the peer review and monitoring process.
The peer review process is conducted in two stages. Stage 1 assesses countries against the terms of reference of the minimum standard according to an agreed schedule of review. Stage 2 focuses on monitoring the follow-up of any recommendations resulting from jurisdictions' Stage 1 peer review report. This report reflects the outcome of the Stage 1 peer review of the implementation of the Action 14 Minimum Standard by the Faroe Islands.
The North Atlantic (NORA) region is a transnational area comprising the Faroe Islands, Greenland, Iceland, and the coastal counties of Norway. These territories are linked by shared characteristics and challenges, as well as by historical, institutional and cultural links. Improving accessibility to the region, ensuring sustainable development of its fisheries, enlarging and diversifying its economic base, and meeting the challenges of climate change are key issues. Strengthened regional co-operation can help these territories address them by exchanging know-how and best practices, pooling resources and reaching economies of scale, improving the efficiency of public sector provision, and increasing the “voice” of the region.
However, transnational co-operation in the NORA region faces some barriers, as it involves territories that compete in their main economic activities, are separated by large distances, and have strong institutional and economic links with other countries and regions. In order to get the most from transnational co-operation, this report recommends that the NORA territories: focus co-operation efforts on targeted themes and issues; draw up a regional development strategy; promote greater awareness of the benefits of co-operation; develop a “variable geometry” approach to regional co-operation; and enlarge and refine the role of the NORA institution as a facilitator of co-operation.
Chapter 3 focuses on the potential of transnational co-operation in the NORA region. The similarities in framework conditions and challenges shared by the NORA regions, the small size of markets and the limited resources within each of the NORA territories argue for collaborative efforts, exchange of know-how and best practices, and transnational co-operation to confront some of the main challenges of the region. The chapter starts with a description of the wide and complex web of territorial co-operation already present in the NORA region. The second section explores both the range of potential benefits of transnational co-operation, and the main barriers that regional co-operation faces. The third section describes the main areas in which there is potential for transnational co-operation. Finally, the fourth section provides a series of recommendations to overcome the barriers to co-operation and to maximise the contribution of transnational co-operation in the NORA region.
Reinforcing economic competitiveness and a sustainable development process in the NORA region will largely depend on its capacity to overcome different challenges related to the remote location of the region, its vulnerability to climate change, and its narrow productive base. The chapter is divided into four sections. Section 1 provides recommendations for improving accessibility and for coping with the peripherality and demographic challenges of the region. Section 2 focuses on the future productivity and sustainability of the fishing industry, as one of NORA’s main economic sectors. The third section identifies the opportunities for diversifying the economic base, and the crucial role that innovation plays in the region. The fourth section considers the challenges of climate change for the main economic activities of the region and the crucial role of adaptation measures to confront the effects of climate change.
At the beginning of this new millennium, regional economies are confronting momentous changes. The globalisation of trade and economic activity is increasingly testing their ability to adapt and maintain their competitive edge. Market integration and cross-border agreements play a prominent role in the development of many regions. Rapid technological change and greater use of knowledge are offering new opportunities for local and regional development but demand further investment from enterprises, reorganisation of labour and production, more advanced skills and environmental improvements.
The NORA territories have a relatively high GDP per capita (only Greenland falls well below the OECD average) and economic performance before the crisis was solid. Yet these territories are highly dependent on a reduced number of primary commodities, mainly fisheries, but also oil and gas. The public sector is relatively large and a major employer in the region. At the same time, this region is characterised by its extreme peripherality, by the sparse settlement pattern and by significant difficulties in terms of communications and accessibility. These factors complicate the region’s trade, economic diversification and provision of public services. This chapter starts with a definition of the unit of analysis of this review: the NORA region. It then assesses the major socio-economic and demographic trends in the region. Finally it underlines four main challenges for the region: geographic peripherality; ensuring sustainable development of the fisheries sector; economic diversification; and adaptation to climate change.
The NORA region comprises the Faroe Islands, Greenland, Iceland, and the coastal counties of Norway, a group of North Atlantic territories linked by shared characteristics and challenges, as well as by historical, institutional and cultural links. Remoteness, sparse settlement patterns, physical barriers between communities and extreme climatic conditions create significant difficulties in terms of communications and accessibility. These factors complicate the region’s trade, economic diversification and provision of public services. However, these territories have managed to cope with their extreme conditions. The region’s rich, relatively unspoiled and unique environment offers a range of opportunities linked not only to fisheries, but to energy and mineral production, eco-tourism, and research on the Arctic environment and climate change. The importance of the Arctic is increasing, and the NORA region occupies a strategic position between Europe and North America, as an entryway to the Arctic.