12 February 2002
Small countries seek OECD commitment to level playing
field - Letter to OECD Secretary-General.
As tax deadline approaches, ITIO wants level playing
only two weeks to go before the deadline set by the
Organisation for Economic and Development (OECD) for
small and developing countries to commit to its controversial
"harmful tax competition" initiative, the
International Tax and Organisation (ITIO) is asking
the OECD for a reciprocal commitment to a level playing
field and an end to double standards.
a letter to OECD Secretary-General Donald Johnston,
ITIO Director Lynette Eastmond asks the OECD countries
to set a new deadline for making their own public
commitment to observing the principles of a level
on behalf of the ITIO, she notes that small and developing
countries "have long objected to being asked
to implement standards that OECD member states themselves
refuse to accept." In particular, the ITIO Director
recalls, the ITIO has "long called for a level
playing field and the elimination of the double standards
implicit in the OECD's 'harmful tax competition' initiative."
out that ITIO members are still considering their
position on the OECD's tax project, Ms Eastmond poses
the fundamental, as yet unanswered, question to Mr
Johnston: "May I ask on behalf of the ITIO when
you anticipate all OECD members making a public commitment
to observing the principle of a level playing field?"
Eastmond explains that, for the ITIO, a level playing
field "does not just mean implementing standards
on an equal basis. It also means involving all countries
in the process of developing the standards."
The ITIO also wants a level playing field "not
just for taxation and corporate vehicle issues but
across all OECD initiatives relating to trade in services."
1. The ITIO's letter to Secretary-General Johnston
is set out below. It was sent on 11 February 2002.
2. The International Tax and Investment Organisation
(ITIO) is a grouping of small and developing economies
(SDEs) set up in March 2001 to help SDEs respond to
global tax and investment challenges. It explicitly
considers the development implications of these challenges.
3. The fourth meeting of the ITIO took place in Vanuatu,
South Pacific, on 4-6 February 2002.
4. The ITIO currently comprises Anguilla, Antigua
and Barbuda, Bahamas, Barbados, Belize, British Virgin
Islands, Cayman Islands, Cook Islands, Malaysia, St
Kitts & Nevis, St Lucia, Turks & Caicos and
Vanuatu. The Commonwealth Secretariat, Pacific Islands
Forum Secretariat and CARICOM Secretariat have observer
5. The OECD has set a deadline of 28 February 2002
for dozens of SDEs to make a commitment to its controversial
"harmful tax competition" initiative or
face "defensive measures" from OECD members
acting together or individually.
6. New standards for exchange of information are currently
being developed in OECD working groups, and new standards
on related matters issues can be expected to follow.
Non-OECD countries will be required to abide by these
on pain of sanctions but there is no guarantee that
OECD countries will themselves observe the new standards.
7. To make matters worse, four OECD member countries
- Switzerland, Luxembourg, Belgium and Portugal -
have refused to sign up to the OECD's tax project.
These include the principal onshore competitors for
the offshore world, and account for many of the tax
neutral structures run onshore within the OECD. ITIO
members are concerned that if these OECD member countries
are not obliged to adhere to the same standards as
offshore centres, business will just migrate to the
OECD. One of the principal outcomes of the OECD's
controversial tax project could thus be to win more
business for its own members at the expense of small
and developing economies.
8. Similar problems are raised by the exclusion of
offshore centres such as Hong Kong, Singapore and
Dubai from the OECD's project.
9. Whatever impression the OECD may give, it has nowhere
explicitly stated that its members will abide by all
the standards being demanded of others.
10. Indeed, an OECD November 2001 report, "Behind
the Corporate Veil: Using Corporate Entities For Illicit
Purposes", clearly accepts two sets of standards
for onshore and offshore jurisdictions. It also ignores
controversial corporate vehicles in OECD member states,
such as the Limited Liability Companies (LLCs) and
Limited Liability Partnerships (LLPs) in the USA which
were so extensively used by Enron.
letter to OECD asking for commitment to level playing
field, 12 February 2002
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