The OECD, the Commonwealth, and representatives of Caribbean and Pacific countries agreed on Tuesday in Barbados to set up a task force to discuss reforms in offshore financial centres involving transparency and exchange of information to combat tax evasion.
The agreement to agree came at the end of a two-day meeting in Bridgetown, Barbados. Announcing the task force, the Barbados Prime Minister, Mr Owen Arthur, who had chaired the meeting, said that all sides agreed on the need for exchange of information, and transparency in the offshore financial centres' dealings and the need to do away with discriminatory practice.
The task force, comprising members of the OECD, Caribbean and Pacific countries or territories, and the Commonwealth, to which many of them belong, would start work immediately in order to contribute to a meeting of the OECD and Pacific nations scheduled to take place in Tokyo next month.
The meeting had begun unpromisingly on Monday with what seemed to be restatements of settled positions by the two sides, although Deputy Secretary General of the OECD, Seiichi Kondo, after restating the organisation's commitment to the criteria against which it had chosen the 35 black-listed jurisdictions, assured his hearers that the OECD was not trying to set minimum tax rates or interfere with the financial privacy of individual citizens. 'What we want to defend are the interests of honest taxpayers in all countries around the world,' said Kondo: 'In launching this debate, we are looking for a genuinely inclusive dialogue, in which all jurisdictions, irrespective of their legal status or of their membership of different organisations, enjoy equal participation.'
The OECD official continued on this more emollient line: 'We must consider how, in this new, liberalised environment, all countries, large and small, can maintain sovereignty over the design of their tax systems. Our watchword is freedom for governments to design their own tax systems and freedom for citizens to prosper in an environment where investment decisions are not primarily motivated by tax considerations.'
But speaker after speaker from Caribbean and Pacific islands voiced resentment at the OECD's high-handed behaviour. Terepai Maoate, prime minister of the Cook Islands, summed up the widespread concern by saying the OECD demands 'cast a discriminatory sweep across the face of small island states struggling to build and uplift themselves.' He attacked what he called 'the broad brush of shame, cloaked threats of financial protectionism, and the destructive force of calculated targeting.' Barbados Prime Minister Owen Arthur said delegates spoke with 'brutal frankness' on Monday and some OECD officials said they were surprised at the sharp criticism.
Outside the formal sessions, observers say that resentment on the part of the island nations was never far beneath the surface. 'Harmful is not our word. It's their word,' said Maurice Odle, an economic adviser for the Caribbean Community Secretariat. According to Odle, the Caribbean Community is considering taking the dispute to the World Trade Organisation.
Pushing the idea of a joint forum to resolve disputed areas, co-chairman of the meeting Commonwealth Secretary General Don McKinnon re-emphasised the point that many Commonwealth countries took issue with the actions of the OECD in challenging the right of non-member states to manage their domestic sovereign tax affairs and in particular to the threat of sanctions.
"However, if effective inclusive dialogue occurs, all countries affected will own the rules and standards," McKinnon said.
The Commonwealth official said his group, like the OECD, was against money laundering and other doubtful financial activities and practices.
"We both want to create clean, transparent economies for businesses to operate within, and to see the adoption of competitive tax practices to both maintain and attract revenue," McKinnon said.
By Tuesday morning delegates had a better understanding of each others' views, but there was certainly no guarantee of a harmonious outcome. One OECD official said off-the-record that both sides needed to 'soften their positions'. OECD Deputy Secretary General Seiichi Kondo said, however, he believed a tangible outcome might be achieved by the meeting's close.
The agreement which was in fact reached seems to represent a success for the offshore jurisdictions, which have gained a 'place at the table' in the sense that the task force created in Barbados does not have to take as read the previous timetables and criteria laid down by the OECD, which on its own has no formal power to bind the jurisdictions. Support for the idea of an independent task-force also came from the World Bank. Its representative Cheryl Gray said that while reforms were needed: 'We need further discussion and dialogue that is fully inclusive so as to lay the basis for international collective action. Any actions should of course apply equally to developed and developing nations.' One of the main complaints of the blacklisted nations has been that many OECD members are guilty of behaviour which is as bad or worse than the things they are accused of.
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