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Towards a Level Playing Field,
second edition.

Report undertaken by Stikeman Elliott on behalf of the ITIO and STEP.




The OECD has accepted that “the level playing field is fundamentally about fairness but “does not yet exist” in the harmful tax practices initiative. In other words, they have acknowledged that the five-year-old initiative is unfair. This is a major step forward.

A working group of OECD and ITIO countries and other small states has been set up to develop proposals for a level playing field.

The OECD will also seek to bring states like Switzerland, Luxemburg, Hong Kong and Singapore into its harmful tax project.

Click for more information:

1. OECD Global Forum on Taxation, Ottawa, 14-15 October 2003: closing statement by the Co-Chairs

2. Global Forum meeting agenda

3. ITIO paper tabled at the Global Forum: “Levelling the Playing Field”

4. Opening statements by ITIO members


The issue

The way that the Organisation for Economic Cooperation and Development (OECD) has run its “harmful tax practices initiative” raises grave questions about OECD countries’ commitment to fairness and a level playing field.

The problem

The 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.

31 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’.

The OECD has also identified ‘harmful tax practices’ among its own members, who control 80 per cent of the international market for cross-border financial services.

The key OECD members of Switzerland, Luxembourg, Portugal and Belgium have responded by opting out of the OECD initiative. Yet they do not face sanctions.

Equally, although they meet the harmful tax practices criteria, major non-OECD centres such as Hong Kong and Singapore have not been targeted.

To 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.

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.

The solution

The ITIO and other small countries are clear that the only way forward for the tax project is according to the principles of a level playing field.

The EU savings tax directive poses a real threat to progress so far.

In early 2002, the OECD accepted the principle of a level playing field in all commitment letters.
At the same time, the OECD agreed to include all committed jurisdictions as ‘participating partners’ in its Global Tax Forum.
In 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”.
In 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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In a groundbreaking decision, the OECD has committed itself to working with members of the ITIO and other countries that provide international financial services to achieve a level playing field for the exchange of tax information.

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