OECD May Delay Sanctions

by Mike Godfrey, Tax-news.com, Washington

14 June 2001

The Organisation for Economic Cooperation and Development (OECD) may delay the imposition of economic sanctions on offshore tax havens until 2003 in order to attempt to secure US backing for their plans, according to experts. Analysts say that the organisation, which was due to impose sanctions on all low tax jurisdictions which had failed to sign up to a list of conditions limiting 'harmful tax competition' on July 31st, may now be wavering on certain aspects after the US Treasury Secretary, Paul O'Neill admitted last month that he had serious reservations about the plan.

They have suggested that the OECD may try to keep the momentum going by instead pressing the blacklisted offshore financial centres to make general commitments to the aspects of the proposal that the US supports, such as transparency and exchange of information. Bob Harland, a tax partner at the Big Five accounting firm PricewaterhouseCoopers believes that this latest development will be welcomed by the offshore havens: 'A period of delay might be helpful,' said Mr Harland, 'That may well avoid too much aggression all round. A reasonable course of action would be to invite a commitment by July 31 to an exchange of information and transparency. That will allow wider consultation. '

There are those who disagree with Mr Harland's definition of reasonable, however. On Monday, the chairman of the Washington based Centre for Freedom and Prosperity, Dan Mitchell, sent an open letter to the leaders of blacklisted offshore jurisdictions warning them not to become complacent in the wake of America's about turn on the issue of harmful tax competition. Mr Mitchell believes that although the tax havens may have seen off the attack on their low tax status (for the moment at least), the forthcoming attacks on financial privacy and fiscal sovereignty are just as dangerous. 'Information exchange is phase two of the battle,' said Mr Mitchell. The CFP was active in organising opposition to the OECD initiative when it first began, and exerted pressure on the US Treasury to reverse its support for the international tax initiative.

The offshore jurisdictions are calling for the sanctions, if and when they are imposed, to apply to OECD members which fall short of the standards being laid out, as they claim that OECD countries are operating a double standard, and are attempting to impose stricter limitations on the (generally smaller) tax havens than they would impose on themselves.

Recommended