ITIO welcomes OECD report with reservations
Questions about level playing field remain
Organisation for Economic Cooperation and Development
(OECD) yesterday issued the long-awaited 2001 Progress
Report for its renamed "Project on Harmful Tax
Practices" (formerly called the "Harmful
Tax Competition Initiative"). Commenting on behalf
of the International Tax and Investment Organisation
(ITIO), a grouping of small and developing economies,
Lynette Eastmond, Director of the ITIO Secretariat,
ITIO has sought consistently to persuade the OECD
that talking and listening to small and developing
economies (SDEs), rather than seeking to dictate to
them, could improve the process. We are delighted
at the OECD's public acceptance of this approach .
The ITIO also welcomes the OECD's removal of the 'no
substantial activities' criterion for deciding whether
to label a tax system harmful.
are intrigued by the report's suggestion that development
assistance may be provided to help SDEs comply with
OECD demands , and look forward to details of what
this will mean in practice.
is a general sense coming out of the report that the
OECD is starting to acknowledge comments about the
lack of a level playing field in the whole process.
The ITIO remains particularly concerned, however,
about the lack of a level playing field in developing
and implementing international standards on the exchange
would like to know whether OECD members are prepared
to state that uniform standards must be universally
adopted, without discrimination. Are they and other
developed economies prepared explicitly to confirm
their intention of abiding by the standards demanded
of small and developing economies? Such reassurances
would help build further confidence in the process.
"We note that yesterday's report was not signed
by Belgium and Portugal, and that Switzerland and
Luxembourg, also OECD members, dissented from the
OECD's 1998 Report. Over ten per cent of the OECD's
30 members, including the leading onshore competitors
with offshore centres, are now refusing to comply
with the demands their organization is making of small
countries. In that sense, the playing field looks
even less level.
final word on sanctions. The close relationship between
taxation, inward investment and trade measures should
not be ignored. There is a likelihood that any sanctions
imposed as a result of the OECD tax initiative could
prove incompatible with multilateral trade obligations.
ITIO is surprised that in the current global environment,
where it has been acknowledged that multilateral solutions
based on the rule of law must be found for international
issues, the OECD would still be considering 'naming
and shaming' a few small, developing countries.
we hope that matters never reach that stage. The ITIO
shares OECD members' stated desire for 'change through
dialogue and consensus'*. In that respect, with all
its flaws, today's report should be seen as an important
NOTES TO EDITORS
1. 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.
2. 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
3. The four OECD member countries who have refused
to sign up to the OECD's project (Switzerland, Luxembourg,
Belgium and Portugal) include the principal onshore
competitors for the offshore world, and account for
many of the tax neutral structures run onshore within
the OECD. Offshore centres are concerned that if these
OECD countries are not obliged to adhere to the same
standards as offshore centres, business will just
migrate to these OECD members, which raises further
doubts about the fairness of the process.
4. Similar problems are raised by the exclusion of
offshore centres such as Hong Kong, Singapore and
Dubai from the OECD's project.
5. The OECD's progress report is available online
*OECD report, para. 49.
"The dialogue between the OECD Members and the
tax haven jurisdictions has resulted in the OECD having
a better understanding of the concerns of the jurisdictions
regarding the commitment process and participation
in the harmful tax practices work (para 23).
"The Committee has also explored with the Development
Assistance Committee the forms of assistance that
may be appropriate to help committed jurisdictions
further develop their economies as they move to eliminate
harmful tax practices. Other international organisations
and development banks, such as the World Bank, have
also offered to assist in this effort. OECD Member
countries will continue to examine how their assistance
programmes can, on a bilateral basis, be re-targeted
to assist committed jurisdictions and to encourage
international organisations to take into account the
special needs of committed jurisdictions in the design
of multilateral assistance programmes" (para.
"The Committee recognises that the potential
application of a framework of co-ordinated defensive
measures to tax havens prior to their potential application
to OECD Member countries raises concerns regarding
a level playing field between Member countries and
tax havens. Therefore, the Committee agreed that a
potential framework of co-ordinated defensive measures
would not apply to uncooperative tax havens any earlier
than it would apply to OECD Member countries with
harmful preferential regimes" (para 32).
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