Is OECD preparing sanctions against Switzerland
and Luxembourg or not?
Speaking today, Lynette Eastmond, Director of the
International Tax and Investment Organisation, which
represents small and developing economies, made the
following statement about the Organisation for Economic
Cooperation and Development's publication of a list
of "uncooperative tax havens".
OECD is concerned that a group of small countries
has not signed up to its principles of transparency
and exchange of information. Its officials have even
now started the work of preparing a "framework
of defensive measures" (i.e. sanctions) to impose
on these countries after April 2003.
OECD says it understand small countries' concerns
about establishing a level playing field. It agrees
with the ITIO that "it is in no one's interest
that harmful activities move to jurisdictions that
do not meet acceptable standards of transparency and
effective exchange of information".
as things stand, on one hand sits group of small countries,
most of which have committed to change their so-called
"harmful tax practices" and a few of which
haven't. For these latter countries, the OECD has
today made clear that its officials are developing
a "framework of defensive measures" to impose
after April 2003.
the other hand sit the OECD countries, most of which
have committed to change their own "harmful tax
practices" by April 2003 but two of which, Switzerland
and Luxembourg - the leading onshore competitors with
the targeted small countris - haven't. For these latter
countries, the OECD has given no indication that "coordinated
defensive measures", which must be tailored to
each country, are being prepared.
the ITIO does not support the imposition of sanctions
within the context of tax matters, the current position
appears uncertain and strongly suggests the lack of
a level playing field.'
1. Back in 1998, the OECD published a limited list
of "tax havens" and demanded these make
changes to their systems. Major finance centres like
Switzerland and Luxembourg (OECD members) and Hong
Kong (part of powerful China) did not figure on the
2. The OECD also identified "harmful tax practices"
in its own member states. Most of its members agreed
to reform these by April 2003. Switzerland and Luxembourg
abstained from the report and from the whole process.
3. Most of those identified by the OECD as tax havens
have now made a commitment to the OECD's project.
Seven countries (Andorra, Liechtenstein, Liberia,
Monaco, The Marshall Islands, Nauru and Vanuatu) have
not done so. Some have complained about the OECD's
neo-colonial approach and the leeway granted to Switzerland
4. The OECD today stated: "OECD member countries
will use the list [of seven uncommitted countries]
as a basis for the framework of co-ordinated defensive
measures now being developed" for imposition
after April 2003. Such measures will inevitably be
very specific and country-focused.
5. April 2003 is also the date by which OECD countries
are required to reform their "harmful tax practices".
Presumably, those who do not do so will have sanctions
imposed on them. Yet the OECD has said nothing about
"the framework of co-ordinated defensive measures
now being developed" also applying to Switzerland
6. Offshore centres believe that a level playing field
should apply to OECD and non-OECD countries alike.
They are deeply concerned that, if OECD countries
are not obliged to adhere to the same standards, business
will just migrate to OECD members.
7. 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.
8. 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, CARICOM Secretariat, Caribbean
Development Bank and Eastern Caribbean Central Bank
have observer status.
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