The United States has backed away from the 'Harmful Tax Initiative' by the Organisation for Economic Cooperation and Development (OECD) but the Prime Minister says the Cook Islands will not ease up on promoting the need for a multilateral process in the debate over international taxation issues.

"On the contrary, the Cook Islands will maintain the position it established in Barbados," Dr. Maoate said on the eve of his departure for Malaysia. He was referring to the High Level Multilateral Dialogue in early January, which was the first opportunity the Cook Islands had to voice its concern in the international arena over the 'Harmful Tax Practices Initiative' by the Organisation for Economic Cooperation and Development (OECD).

The Prime Minister welcomed news of the US position on the OECD initiative but said the debate is not over because the 29-member OECD had consistently maintained its threat of sanctions against so-called tax havens.

About two weeks ago, the Secretary of the US Treasury Paul O'Neill stated that the OECD initiative was too broad and not in line with the Bush Administration's tax and economic priorities. Those campaigning against the OECD move to curtail the tax policies of small Offshore Financial Centres (OFCs) interpreted the statement as a major blow for the OECD but a victory for tax competition and fiscal sovereignty.

"The United States does not support efforts to dictate to any country what its own tax rates or tax system should be, and will not participate in any initiative to harmonize world tax systems," Secretary O'Neill said. International lobbyists like the Washington-based Center for Freedom and Prosperity had been waiting for the low-tax favoured Bush Administration to strike the blow and weaken the OECD initiative. The US is the major player in the OECD.

The Prime Minister said the Cook Islands acknowledged the concerns of the OECD but would not be forced to accept unilateral decisions over what constituted harmful taxation practices, or which defined the terms of acceptable standards. "My concerns recorded in Barbados pointed to the need for multilateral discussions and consensus on international taxation standards." Small jurisdictions just felt that they were being whipped into line and having their economic gains destroyed by the decisions of a narrow group of countries, Dr. Maoate said. "Clearly, this is not fair to small islands states engaged in legitimate tax competition and still struggling with narrow and vulnerable economic bases."

Since last January, the Cook Islands has been active in the negotiation process with the Prime Minister and his Offshore Finance Commissioner, Mathilda Uhrle, engaged in multilateral discussions. The Commissioner for example, has occupied a place on the combined OECD-Commonwealth Working Group to progress the debate at Barbados.

Justice Minister Tangata Vavia also led a delegation to Tokyo in February for dialogue between the OECD and the Pacific Islands countries. Ms. Uhrle has also attended technical meetings and been engaged in the International Tax and Investment Organisation (ITIO), which Offshore Finance jurisdictions established to strengthen the cooperation between small and developing countries.
The OECD gave tax havens until the end of July to undertake certain commitments or face blacklisting as being uncooperative and sanctions. In his statement, Secretary O'Neill expressed concern about "the potentially unfair treatment of some non-OECD countries".