Offshore Jurisdictions Push OECD To Respond To Questions

by Jason Gorringe, Tax-News.com, London

07 June 2001

The OECD's Forum on Harmful Tax Practices is meeting in Paris on 11-13 June and the International Tax and Investment Organisation (ITIO) has called on the OECD to honour promises it made to them at multilateral meetings earlier this year, to answer questions, provide information and clarify aspects of its 'harmful tax competition' initiative.

The ITIO, which grew out of the work of the OECD-Commonwealth Joint Working Group on Harmful Tax Competition, was set up in March 2001 to help small and developing economies (SDEs) respond to global tax and investment challenges. It explicitly considers the development implications of these challenges. The ITIO currently comprises Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Cook Islands, Dominica, Malaysia, St Kitts & Nevis, Turks & Caicos and Vanuatu. The Commonwealth Secretariat, Pacific Islands Forum Secretariat and CARICOM Secretariat have observer status.

Yesterday the ITIO issued the following press release:

ITIO urges OECD: "Keep your promise, consider our missing three months"

The International Tax and Investment Organisation (ITIO) today called on the Organisation for Economic Cooperation and Development (OECD) to keep the promise it made three months ago to clarify fundamental aspects of its "Harmful Tax Competition Initiative".

Lynette Eastmond, Director of the ITIO Secretariat, explained: "The OECD have given us a deadline of 31 July to commit to their initiative, yet despite constant reminders, have still not kept their promise to clarify basic points."

The ITIO said that it hoped a meeting of the OECD's Forum on Harmful Tax Practices next week would provide the much-needed clarifications.

The ITIO urged the OECD's Tax Forum to take into account the OECD's three-month failure to respond when considering whether to press small and developing economies (SDEs) to make tax policy commitments by 31 July.

Another reason for reviewing the deadline, said the ITIO, was the continued lack of a clear OECD statement on the tax initiative since the expression of serious concerns by the USA on 10 May, which had caused further confusion and delay.

SDEs want reassurance that the OECD is not asking them to do more than OECD members themselves. A group of SDEs sought clarification on this and other fundamental points at a meeting with the OECD in Paris on 28 February 2001. The OECD promised on 2 March to respond in writing but has still not done so.

Lynette Eastmond added, "Small and developing economies need the clarifications promised in March in order to avoid being forced into unclear and open-ended commitments. We also need a clear understanding of where the OECD is going with its tax initiative."

"This continuing delay has prevented small and developing economies from preparing a properly informed response to the OECD for over three months. We will be watching closely to see how the OECD plans to deal with our missing three months."

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The seventeen fundamental points on which the OECD promised written clarification three months ago are as follows:

1. In light of paragraph 6 of the 1998 Report which states that the report focuses on geographically mobile activities such as financial and other services, and having further reference to paragraphs 10 and 18 of the Report, could the OECD please confirm that the commitments being sought are confined in their scope only to geographically mobile financial and other services?

2. In light of paragraph 12 of the 1998 Report which states that the treatment of cross-border saving instruments, particularly bank deposits is not considered at this stage, please confirm the understanding that the affairs of individual physical persons (e.g. interest on bank accounts, portfolio investments and property holding) are not covered by the commitments?

3. Having reference to the Principles mentioned above, please confirm that all of the undertakings sought from the listed economies in relation to transparency, information exchange and non-discrimination are the subject of identical, specifically enumerated commitments given severally by OECD member countries?

4. Please provide specific cross-references in the 1998 Report to the express and detailed provisions of the Principles.
5. Please confirm:-

(a) that members of the OECD will implement any necessary programmes of reform to will enable them to comply with the standards set out in the MOU;

(b) what steps will be taken to monitor the effective implementation of such commitments by OECD members;

(c) that individual OECD member countries are prepared to apply the same defensive measures to non-complying OECD members as may be applied to any listed countries; and

(d) that failure of OECD members to comply with standards set out in the MOU will be grounds for the committed tax havens to resile from the implementation of the same commitments?

6. Is the OECD able to confirm that the transparency criterion (set out in the Principles) relating to governmental access to beneficial ownership and financial information would be satisfied if the government could obtain such access in the event of an investigation being initiated?

7. Is the underlying standard to which reference is made in the area of beneficial ownership information deemed to be satisfied through compliance with the Financial Action Task Force Recommendation 11 and more specifically to the Interpretative Notes to Recommendations 11 and 15-18? If not, to what alternative or additional standards should Working Group members have reference?

8. To what extent is the transparency criterion relating to access to bank information the same as the standard unanimously agreed among OECD countries as reflected in paragraph 21 of the report entitled "Improving Access to Bank Information for Tax Purposes" (OECD, Paris, 2000 at p. 14).

9. Can the OECD confirm that it supports the development of a Global Forum, in which ALL countries and economies which wish to participate and are committed to international co-operation in cross border tax issues, will be equal partners and that it will be this body through which agreement will be sought on international standards on cross border taxation (for example, in the definition of "civil tax matters" for the purposes of international tax information exchange agreements.

10. Can the OECD give a definition, as accepted by OECD member countries, of what is covered by the term "criminal tax matter"?

11. Can the OECD give a definition, as accepted by OECD member countries, of what is covered by the term "civil tax matter"?

12. Would the anticipated commitment to provide exchange of information in criminal tax matters be satisfied through the utilisation of procedures for the provision of mutual assistance in criminal matters? If not, why not?

13. Please confirm that the reference to the absence of impediments to the disclosure of exchanged information contained in the Principles is intended to operate only to permit such information to be utilised for matters falling within the scope of an arrangement relating to geographically mobile financial and other services.

14. Which OECD member states have identified and agreed their own harmful tax practices and what are those practices?

15. Which OECD countries have taken specific steps to remove identified harmful tax practices and what are those steps?

16. Could the OECD please outline its proposed programme for involving countries other than "tax havens" in the process of entering into and implementing the same commitments as committed "tax havens"? Is it expected that such countries will have implemented these commitments by the end of 2005. If not, when is the expected date and when would they be subject to any defensive measures if they remain uncommitted?

17. What action has been taken by the OECD members to identify and list any measures in their tax regimes which constitute "ring fencing" and what steps are being taken to eliminate such measures?

28 Feb. 2001

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