HARMFUL TAX PRACTICES
way that the Organisation
for Economic Cooperation and Development
has run its “harmful tax practices initiative”
raises grave questions about OECD countries’
commitment to fairness and a level playing field.
OECD has unilaterally named dozens of small and developing
economies as ‘tax havens’ and demanded
they commit to transparency and the exchange of information
or face unspecified sanctions.
small states have made this commitment on the basis
that a level playing field be created. The OECD has
placed a further six small countries on a list of
‘unco-operative tax havens’.
OECD has also identified ‘harmful tax practices’
among its own members, who control 80 per cent of
the international market for cross-border financial
key OECD members of Switzerland, Luxembourg, Portugal
and Belgium have responded by opting out of the OECD
initiative. Yet they do not face sanctions.
although they meet the harmful tax practices criteria,
major non-OECD centres such as Hong Kong and Singapore
have not been targeted.
make matters worse, in June 2003, even while the OECD
was asking ‘committed jurisdictions’ to
exchange information on request from 2005, the European
Union (which comprises 15 of the OECD’s 30 members)
agreed a directive
on the taxation of savings that exempted
Austria, Belgium and Luxembourg from exchanging information
on demand until leading OECD members Switzerland and
the USA, as well as Liechtenstein, San Marino, Monaco
and Andorra, exchanged it on request, which is not
expected to happen before 2010, if at all.
this intensifies concerns that, whether intended or
not, the consequence of the OECD's tax project may
be to cause business to migrate from small developing
countries into finance centres which are members of
the OECD or protected by large countries.
ITIO and other small countries are clear that the
only way forward for the tax project is according
principles of a level playing field.
The EU savings tax directive poses a real threat to
progress so far.
early 2002, the OECD accepted the principle of
a level playing field in all commitment
the same time, the OECD agreed to include all
committed jurisdictions as ‘participating
partners’ in its Global Tax Forum.
November 2002, the Global Forum’s Ad Hoc
Group on Accounts, which includes the USA, the
UK, France, Germany, Canada, Mexico and Japan,
issued a communiqué,
stating that “it is valuable to examine
current and developing standards and practices
in all countries and territories in taking this
work forward to achieve a level playing field”.
September 2003, a communiqué
from Commonwealth Finance Ministers welcomed the
fact the OECD’S Global Forum of 15-16 October
would “focus on the issue of a level playing
field and stressed that the way forward required
a satisfactory resolution of this issue."
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