In advance of this week's meeting of the OECD's Fiscal Affairs Committee, which is expected to pronounce on the future of its 'harmful tax competition' project, the International Tax and Investment Organisation (ITIO) has warned the OECD to involve small countries properly in discussions or face the effective collapse of its initiative.
Specifically, the ITIO is urging opening up the OECD-sponsored Global Tax Forum to all countries committed to the OECD's three broad principles of transparency, non-discrimination and exchange of information.
At the moment, the Forum is open to all non-OECD countries who accept these broad principles except for the SDEs being examined by the OECD as potential tax havens. These are also required to jump the extra hurdle of entering into detailed and open-ended agreements with the OECD before being allowed to participate in the Forum.
ITIO spokesperson Ben Coleman commented, "It is manifestly unfair to exclude the countries most affected by the OECD project. It is also thoroughly silly to exclude countries who have more hands-on experience of offshore issues than most OECD members.
"If the OECD still aims to arrive at workable agreements, they will first need to start involving small and developing economies equally and fully in discussions, on the basis of true partnership.
"Inviting them to become members of the Global Tax Forum on the same basis as all other countries would demonstrate good faith and be a helpful first step. Without this inclusive approach, it is difficult to see a way forward for the OECD's tax project."
The OECD has consistently been criticised for the top-down, dictatorial way in which it has run the initiative. Stung by the criticism, at a meeting in Malta on 19-21 September 200, OECD Ministers called for greater regional and multilateral dialogue on the implications of the OECD proposals, with a view to developing multilateral approaches to take forward the work on all aspects of global tax issues. They requested the Commonwealth Secretariat to facilitate this process.
After a series of meetings early this year, OECD members decided to open up the Forum to all jurisdictions that showed a genuine interest in curbing harmful tax practices. All the 35 small and developing economies (SDEs) targeted by the OECD have agreed to these principles. Yet they have been excluded from the Forum unless they sign up to detailed agreements with the OECD, which only six have done. Meanwhile, the OECD has encouraged over 55 other non-member countries, such as Argentina and South Africa, to participate in the Global Tax Forum on the basis that they accept the OECD's broad principles.
The ITIO, which was set up by a number of the SDEs thus excluded from the Global Tax Forum, sees no equitable reason for not including all SDEs on the same basis as other non-OECD countries. It currently comprises Anguilla, 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 status.
The ITIO's formal remit is to:
• Strengthen international cooperation between small and developing
economies (SDEs) in both tax and investment matters.
• Assist SDEs to work with international organisations.
• Consider the development implications of international tax and
investment challenges.
ITIO members are currently developing a common response to the OECD's Harmful Tax Competition Initiative. They are also establishing a work programme to raise awareness of other global tax and investment challenges and devise appropriate responses to these. This will involve coordinating members' activities, disseminating information, undertaking research, providing analysis and advice and facilitating technical assistance.
Other planned areas of activity include e-commerce and investment incentives. The OECD is targeting so-called "harmful" competition in the taxation of e-commerce. This is an important & issue for small and developing economies (SDEs). The OECD also intends to address so-called "harmful" competition in manufacturing. This could lead to an attack on the incentives that underpin the economic development of many SDEs seeking foreign investment
The ITIO now has a web-site at http://www.itio.org/news.htm
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