New Labour Eats Forbidden Fruit While OECD Crusades

Jeremy Hetherington-Gore, Tax-News.com, London

08 January 2001

While the assembled might of the world's financial establishment strips off for another oh-so-amusing session of 'tax haven bashing' in Barbados, Tony Blair yesterday confirmed that he was 'proud' that his New Labour party was in receipt of millions of pounds from rich and successful Brits - of which £2m was paid straight from the Bank of Bermuda in Hamilton. The Tory party won't be making too much noise on the subject though: it has just announced a £1m donation from Monaco-based conference organiser and yachtsman Irvine Laidlaw, and would probably have become insolvent three years ago without the help of the Belizean riches of Michael (now Lord) Ashcroft.

The OECD's Barbados meeting is the latest stage in its campaign to force tax harmonisation on offshore jurisdictions under the guise of money laundering controls. Some jurisdictions (eight, in fact) have made the required commitments to the OECD, which seemingly amount to a level domestic/offshore tax regime and the installation of information-sharing (telling home tax authorities about tax-avoiders). Dozens of others are holding out, although many have adjusted their legal regimes in a gesture towards propriety. The Barbados meeting, which is being attended by the IMF, the World Bank and the UN alongside the OECD, appears to be an overt attempt to bribe many of them into submission with the promise of assistance programmes if they lessen the threat to rich country treasuries.

From the perspective of the jurisdictions, the Barbados meeting gives them a chance to band together against the OECD's troops, something they should have done a year ago, instead of spending the time on individual attempts to placate their tormentors. The reality seems to be that a calm and determined refusal to treat on the OECD's terms coming from a majority of the threatened jurisdictions would probably have been successful, and could still work even now. The OECD's politically-correct battle hymn sounds terrifying and irresistible to a small tropical island, with sanctions threatened against errant jurisdictions which would destroy their business overnight. In fact, the on-shore world is too much in thrall to 'offshore' for such threats to be credible, as is shown by Tony Blair's shameless acceptance of offshore money on the very weekend when his crusaders are getting ready to do battle in Barbados.

The OECD's bargaining position is actually very weak, however tough it sounds. First of all, its strongest and most important member, the US, now has a Republican President and Congress, and is unlikely to support action against 'offshore' except in egregious cases. Secondly, the EU, which was supposed to deliver 'information-sharing' between its member states, will only be able to do so if Switzerland, Luxembourg, the Channel Islands and the USA all simultaneously agree to do the same thing. It just won't happen, anyway not in this decade and probably not in the next two decades.

So the assembled jurisdictions in Barbados just need to be brave, and a little bit clever. Say to the OECD, all right, we will do anything that your members do, and nothing that they won't do. And wait.

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