OECD Leaders Discuss Fresh Offshore Crackdown

by Mike Godfrey, Tax-News.com, Washington

22 October 2008

Leaders from the Organisation of Economic Cooperation and Development (OECD) member nations gathered in Paris on Tuesday where a new crackdown on offshore financial centres is expected to be discussed as part of plans aimed at tighter regulation of the global financial system.

The initiative is being led by the governments of France and Germany, and could lead to the drawing up of a new 'black list' of offshore jurisdictions still deemed to be 'uncooperative' or with tight banking secrecy and confidentiality laws. Switzerland, Luxembourg and Austria - all jurisdictions with a measure of banking secrecy - have apparently boycotted the meeting.

From an offshore point of view, the recent rhetoric from the French government concerning the current banking crisis is worrying. Last week, President Nicolas Sarkozy questioned why banks that have received backing from the government should continue "operating in tax havens," while Prime Minister Francois Fillon described offshore financial centres as the "dark pockets" of global finance which should be eliminated altogether.

The OECD launched its campaign against 'harmful' tax competition at the turn of the century, naming more than 30 jurisdictions on its blacklist, since which time the majority have been removed after promising to put in place tax reforms that effectively removed the distinction between 'onshore' and 'offshore' regimes.

Meanwhile, the OECD's Financial Action Task Force, which was more concerned with anti-money laundering, also placed more than a dozen jurisdictions on its blacklist, all of which have been removed after putting in place legislation which some argue is even tougher than in some onshore countries. Despite this, French Budget Minister Eric Woerth has suggested the need for a new blacklist to be released some time in 2009.

It is thought that about 18 leaders attended Tuesday's meeting, and most are likely to be sympathetic to the Franco-German position. However, the US was notable by its absence at the meeting with the looming Presidential election taking precedence. Nonetheless, Washington is almost certain to support another offshore crackdown in the months and years ahead, whoever is in the White House.

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