OECD Believes That Bush Administration Supports Its Anti-Offshore Initiative

Jason Gorringe, Tax-News.com, London

02 February 2001

Reporting on last weekend's London talks between the OECD and representatives of a group of offshore jurisdictions, Dan Mitchell, Chairman of the Centre for Freedom and Prosperity (CFP), said: "We went to London to offer support and advice to the low-tax nations. Our goal, as outlined in our strategy memo, was to make sure none of the low-tax countries acquiesced to the OECD's one-sided Memorandum of Understanding. We're happy to report that our mission was accomplished." The CFP is at www.freedomandprosperity.org.

Andrew Quinlan, the president of CFP, commended low-tax countries, stating: "Taxpayers around the world owe a debt of gratitude to Prime Minister Owen Arthur of Barbados and Sir Ronald Sanders, Antigua's High Commissioner in London. These gentlemen played an instrumental role in the negotiations and refused to be bullied by the OECD."

Messrs Mitchell and Quinlan (who were not official participants at the meeting) say that the OECD misrepresented the new Bush administration's position on the 'harmful tax competition' issue by saying that the new administration actively supports their initiative - including the threat to use financial protectionism against low-tax nations. Mr. Mitchell strongly condemned this tactic, noting that "Neither President Bush nor Treasury Secretary O'Neill have expressed any support for the OECD's campaign against low taxes and financial privacy. Indeed, we are very optimistic that the new administration will take the opposite position once they have a chance to review the issue."

Mr. Quinlan concurred, adding that "Career bureaucrats at the Treasury Department and IRS are trying to tie the hands of the new Treasury Secretary, but they will not succeed. The Center will be meeting with Bush Administration officials and key lawmakers on Capitol Hill to make sure
that this issue is decided on the basis of what is best for taxpayers and the American economy, not what is best for tax collectors."

The CFP also announced that it will send a delegation to Tokyo for the OECD's February 15-16 regional conference, which is the next step in the 'harmful tax competition' process.

It remains unclear whether the counter initiative launched by the threatened offshore jurisdictions in Barbados, and maintained in London, is having any impact. The OECD certainly doesn't seem to have modified its position noticeably, claiming that it is bound by the 'instructions' of its component member states. The OECD apparently said during the London talks that if the offshore jurisdictions on its blacklist do not sign up to its programme, then it is under pressure from the U.S. to ditch the talks and simply impose the July 31 deadline with no further discussion (after which the member states have said they will impose 'sanctions' on the listed jurisdictions).

Tony Hinton, Australia's ambassador to the organisation and co-chair of the London talks (with Prime Minister Owen Arthur of Barbados), said the 13-member working group's remit was to examine positions, draw up possible ways forward and then report back to the principals who could decide on action to be taken.

The OECD understands it needs to consult more widely, he said, although he refused to specify whether the consultations could lead to changes in the OECD's thinking. "My personal judgement is that this process has involved substantial input on the OECD's thinking from non members," he said.

Mr Arthur said the talks needed to continue, and should proceed in mid-February at a meeting in Tokyo of Pacific states already planned by the OECD. The Commonwealth and the non-OECD members of the working group which met in London are expecting to take the discussions up in Tokyo, and Commonwealth representatives said that it would 'sponsor' the continuing talks; but the OECD has yet to formally invite the group's members.

It is clear that there are differing interpretations of the role of the working group, and these caused some problems in London. The OECD does not accept the group's meetings as a valid decision-making forum, not least because it is non-inclusive. The group consists of representatives from Antigua and Barbuda, Australia, Barbados, the British Virgin Islands, the Cook Islands, France, Ireland, Japan, Malaysia, Malta, the Netherlands, Vanuatu, and the United Kingdom.
Tony Hinton said that a response to the proposal from the group's offshore members for a 'Global Tax Forum' (in which to discuss such subjects as harmful tax competition) would be premature until all 35 of the targeted offshore financial as well as the OECD member nations have a chance "to consult their constituencies", adding that the proposal for a global forum is "an ambitious one that will take creativity" to accomplish.

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