OECD Faced With United Front By Offshore Jurisdictions

Tax-News.com, London

07 March 2001

The meeting of the Joint Working Group (combining representatives of the OECD, the Commonwealth Secretariat and the offshore jurisdictions) in Paris last week seems to have made significant progress towards a resolution of the 'harmful tax competition' imbroglio.

Reporting on the meeting, US Centre for Freedom and Prosperity, which has been closely, if unofficially involved with the Working Group's progress, said:

' The low-tax countries stood up to the OECD and should be commended. The outstanding leadership of Barbados' Prime Minister Owen Arthur and Antigua's High Commissioner Sir Ronald Sanders must be acknowledged. I can say without exaggeration that these two gentlemen have made a tremendous difference in this debate.

'Media reports illustrated the OECD's defeat in Paris. From the release of the internal "memo" that insulted the Commonwealth Secretariat to the refusal to treat the non-OECD countries as sovereign nations with as much rights as any OECD country, it became quite apparent that the bureaucrats in Paris have not retreated from their imperialistic agenda.

On the other hand, the proposed plan by the Commonwealth countries seems to be very fair. Indeed, we think the proposal is too generous in that it does not make clear that countries should not try to tax income earned outside their borders.'

Sir Ronald Sanders, special representative of Antigua and Barbuda on the Joint Working Group, issued a statement giving details of the offer made by the offshore jurisdictions to the OECD:

'At the meeting in Paris on 2 March of the Joint Working Group of OECD and non-OECD countries, the targeted jurisdictions unanimously offered the following three things to the OECD:

'(a) to sign a letter of commitment to the principles of non-discrimination, transparency and effective exchange of information as an entitlement to join the OECD's Global Tax Forum and its Working Groups so as to contribute to the development of principles and standards applicable to OECD and non-OECD jurisdictions;

'(b) to complete a plan for implementing agreed principles by 31 July 2001; and

'(c) to implement undertakings of an agreed plan by 31 December 2005.

'In return, the non-OECD jurisdictions requested:

'(i) no less favourable treatment in tax matters than is given to any OECD country;

'(ii) participation as equals in the decision-making process of the OECD's expanded Global Tax Forum; and

'(iii) the lifting of the threat of sanctions.

'The OECD representatives didn't accept the proposals outright. They expressed 'discomfort' with some of the details and asked to put forward 'changed language' during the course of this week. The OECD co-Chair Ambassador Tony Hinton of Australia will contact the non-OECD co-Chair, Prime Minister Owen Arthur of Barbados. The prime minister will consult with the non-OECD representatives of the Joint Working Group and if we agree the language, then we will have an agreement.

'However, if the OECD seeks to use new language to tighten the hammerlock on these small jurisdictions, it will not find them easy victims.

'These small jurisdictions have no interest in the failure of the Joint Woking Group. Attracting sanctions from the world's wealthiest countries is a daunting prospect for small states whose economies will doubtless suffer. So too will civil order and the maintenance of democracy which cannot be sustained in conditions of economic decline. At the same time, the jurisdictions cannot simply surrender to OECD demands that will strengthen the financial services sectors of OECD member countries at the expense of their own. To do so would be to cause their death anyway; this time by a thousand cuts.

'The OECD countries have a real chance to raise the banner of international cooperation by lifting their threat of sanctions and welcoming the 26 jurisdictions into an expanded Global Tax Forum as equal participants on the basis of their commitment to the three principles of transparency, non-discrimination and effective exchange of information. Let us hope they take it.

'Prior to the Paris meeting, attempts were made to demonize Prime Minister Arthur for the robust way in which he has defended the interests of the non-OECD countries as co-Chair of the Joint Working Group. That was a sad display.

'In any event it should be known that Prime Minister Arthur's leadership of the non-OECD members of the Joint Working Group has been fully appreciated by all of the non-OECD members. He has consulted with everyone and drawn every participant into the decision-making process.

'Nothing he has done is attributable to him alone. We all share responsibility.

'As a member of the Working Group, I can say without fear of contradiction that the non-OECD members of the Working Group are grateful to the prime minister for the authority and considerable intellectual strength that he has brought to our own deliberations and our negotiations with the OECD.'

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