Heritage Foundation Fellow Speaks On OECD London Meeting

by Robin Pilgrim, LawAndTax-News.com, London

03 February 2004

In a statement released ahead of a tax competition seminar in London, sponsored by the Institute of Economic Affairs (IEA), Heritage Foundation senior fellow, Dan Mitchell called into question the purpose of the OECD "level playing field" sub-group, which is also meeting in London this week.

Drawing attention to the stalemate situation created by the level playing condition imposed by many low tax jurisdictions when they committed to eliminating 'harmful' tax competition, Mr Mitchell explained that:

"Using the threat of protectionism, the OECD convinced many so-called tax havens to sign "commitment letters" indicating that they would take the aforementioned steps, but the low-tax jurisdictions simultaneously stated that the letters were not binding unless all OECD nations agreed to abide by the same misguided rules. This "level playing field" requirement has created a stalemate since a number of nations – including OECD members such as the United States, the United Kingdom, Luxembourg, and Switzerland – are "tax havens" according to the OECD's own definition."

"The OECD hoped this problem would be solved by the adoption of the European Union Savings Tax Directive. At one point, this tax harmonization scheme would have required all EU nations – along with six non-EU nations including Switzerland and the United States – to automatically collect and share information about nonresident investors. Had that proposal been implemented, low-tax jurisdictions would have faced tremendous pressure to comply with OECD demands (even though the level-playing-field requirement still would not be satisfied because certain tax havens in Asia and elsewhere would have been exempt)."

Suggesting that the EU directive became a moot issue, when several OECD nations were excused from any requirement to share information, Mr Mitchell asked:

"So what, then, is the purpose of the London sub-group meeting? There is no good answer to this question, but the best guess is that the OECD does not want to officially admit that its project has failed. It is also likely that the Paris-based bureaucrats hope that endless nagging might convince low-tax jurisdictions to acquiesce. But this hardly seems to be likely, particularly since leaders of low-tax jurisdictions – contrary to conventional wisdom among OECD officials – are not unsophisticated people that can be easily hoodwinked."

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