OECD/EU Accused Of "Fiscal Colonialism"

Mandy Robinson, Tax-news.com, London

29 August 2000

Offshore tax regimes are constantly under threat from the condemnations of international organisations such as the OECD and the EU, and the only way to shake off these bullies is to appeal to the United Nations - so says Chief Executive of the Jersey based Basel Trust Corporation, Ben Bendelow.

Mr Bendelow, also president of the Offshore Institute, expressed his opinion in a recent edition of the Offshore Finance Yearbook in which he argued that developed countries endeavoured to undermine the autonomy of less developed countries (LDCs) by dictating their tax policies, and that this type of behaviour from the OECD/EU is tantamount to 'fiscal colonialism'. He complained: 'this is a very slippery slope and should only be agreed to by any of the developing countries on the basis that financial compensation will be provided by the OECD/EU.'

Mr Bendelow compared the situation to that of EU farmers who were offered billions to cease growing produce the market does not want, saying that if the OECD/EU wanted to prevent less developed countries from offering tax benefits to non-residents, then they should provide them with a compensation package of some kind. Mr Bendelow said that he suspected that 'such compensation offers are not even contemplated by any OECD member, the solution, therefore is to take the issue of fiscal colonialisation to the General Assembly of the United Nations. In other words, to make the political leaders of the OECD/EU realise that there will be a steep political cost in continuing to pursue their current policy.'

Mr Bendelow is not a lone voice in berrating the OECD for its recent report on tax havens. Dr Daniel Mitchell, a senior fellow at the Heritage Foundation in Washington (known as a major Washington think tank), as well as a former advisor to the Senate Finance Committee, has written a critical analysis of the OECD's behaviour. Dr Mitchell's criticism of the OECD's quest to eliminate low tax regimes and their threat of competition for higher tax rate countries stems from his belief that governments from powerful industrialised nations are looking to construct a 'cartel' of high tax countries.

In the Wall Street Journal last month, Dr Mitchell wrote: 'Cartels, by their very nature, only succeed if consumers have no alternatives. For instance, if conducted unilaterally, the EU’s crusade to protect high tax nations is doomed to failure. Jobs, talent and capital will migrate out of the EU to jurisdictions with a less hostile attitude to private sector wealth creation.' Furthermore, because the OECD and the EU believe that large cartels will sustain high tax rates, other nations (i.e. in the Caribbean and the South Pacific) will continue to attract new businesses to their tax regimes. Mitchell continued: 'The OECD and EU want to turn back the hands of time. By pushing for a world tax cartel they hope they can undermine the liberalising impact of globalisation on public finance … what these people are aiming at is destroying financial privacy. They are going for the low-tax regimes, no matter what. What we are watching here is the last gasp of the high tax social welfare economy.' Mr Mitchell asserts that a strong stance is needed by the low tax regimes in response to the OECD and would, no doubt, praise Mr Bendelow in his attempt to urge low tax regimes to stand up to the OECD. See an article by Daniel Mitchell in today's Tax-news on Tax Competition.

However, Mr Bendelow says he is not taking the recent OECD attacks on 'harmful' tax havens as seriously as he first thought. He has described the organisation's report as 'not so devastating' in light of that fact that key proposals for tax harmonisation in the recent Primarolo report were rejected by the Benelux nations. 'In short', said Mr Bendelow, 'EU tax harmonisation seems to be pretty dead for the time being.'

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