OECD Backs Off Sanctions On Offshore Jurisdictions
by Ulrika Lomas, Tax-News,com, Brussels
21 June 2004

Participants at the meeting of the OECD Global Forum on Taxation in Berlin earlier this month agreed on a process aimed at achieving high standards of transparency and information exchange in a way that is fair and equitable and permits fair tax competition between all countries. The Forum, which was set up after smaller non-OECD jurisdictions demanded to be involved in global tax decision-making, brought together representatives from over 40 governments to discuss proposals developed jointly by members from the OECD and non-OECD countries.

At the Berlin meeting two proposals presented by St. Vincent and the Grenadines were accepted and adopted by the OECD. A release from the St Vincent Offshore Finance Authority stated that one of the proposals put forward was primarily aimed at postponing the discussion on the imposition of sanctions on countries that fail to comply with the OECD initiative. The St. Vincent and the Grenadines representative, Louise Mitchell, Executive Director of the local Offshore Finance Authority, proposed that "given the fact that there are many unresolved issues on the table, such as the issue of a level playing field, that it was premature to address the issue of defensive measures." It is the imposition of such sanctions that would give real weight to the OECD initiative, which for the time being has been put on hold.

The second proposal was that the OECD should not dictate that countries 'should' take measures to create a level playing field by the year 2006. It was presented that while the OECD and non-OECD members pursue benchmarking exercises to determine the status of the playing field, that the date of 2006, in which countries like SVG originally agreed to the sharing of civil tax information, should be removed. The compromise reached was the removal of the date of 2006 and the changing of the language from 'should' to 'are encouraged'. The removal of the date by the OECD now leaves open and indefinite the timeframe for the original commitments.

In response to the OECD's continued efforts to 'encourage' countries to move ahead in the sharing of tax information, St. Vincent and the Grenadines reiterated its position that it will not seek to actively implement its commitment to the sharing of tax information, while the issues of the level playing field remain unresolved.
St. Vincent and the Grenadines indicated that it would not volunteer to be 'the first off the block' to institute measures that could put SVG at a competitive disadvantage while countries like Switzerland resist such initiatives.

The OECD has conceded both the date as well as the treatment of the imposition of sanctions, because they, in short, have not been able to get compliance of their own member states. The famous EU Savings Tax Directive, which would allow for the sharing of information among EU states, continues to be resisted by countries such as Switzerland, Luxembourg, Liechtenstein and Austria and the USA. The EU is having difficulty implementing even the watered down 'compromise' Directive. As such, OECD members willingly agreed to postpone OECD deadlines, as they have not been able to resolve these issues in their home countries.

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