Offshore Jurisdictions Worry About OECD Report

by Justin Gorringe, Tax-News.com, London

19 November 2001

The International Tax and Investment Organisation (ITIO), a grouping of mostly offshore economies set up in March 2001 to help its members respond to global tax and investment challenges, initially gave a guarded welcome to the OECD latest report on its tax competition initiative, but in the light of comments made by other organisations last week it is now concerned that the impression is being given that the OECD has more support for its initiative than is the case.

Says the ITIO: 'In its statement accompanying the publication of the report on Wednesday 14 November, the OECD says, "There are now a total of 11 committed jurisdictions". In a statement on the same day, Gabs Makhlouf, the Chairman of the OECD's Committee on Fiscal Affairs, said, "Eleven jurisdictions have committed to eliminate their harmful tax practices".

'Some commentators have taken this to mean that nearly a third of the jurisdictions named as tax havens - ie eleven out of 35 - have made a commitment. This is far from being the case. The actual position is that, in the past eighteen months, only five of the 35 (or one in seven) jurisdictions on the OECD's tax haven list have signed up.

'The confusion arises because six potential tax havens made a commitment to the OECD's controversial tax project before the OECD issued its original list in 2000 and thus did not figure among the 35 listed.'

The OECD's own progress report in 2000 ("Towards Global Tax Cooperation") made clear that "A small number of the jurisdictions reviewed by the Forum have, in advance of this reporting, made a public political commitment at the highest level (an 'advance commitment') to eliminate their harmful tax practices and to comply with the principles of the 1998 Report. In recognition of this commitment, this Report does not include the names of jurisdictions that have made this advance commitment ('advance commitment jurisdictions') even if they presently meet the tax haven criteria.'

The ITIO also points out that British Treasury Minister Dawn Primarolo has wrongly claimed that a dozen jurisdictions support the OECD's project, stating, "The [UK] Government welcomes the commitments and action that 12 tax havens have now made to end harmful tax practices".

ITIO spokesperson Ben Coleman commented: "The OECD's tax project is proving less successful than it had hoped. We welcome OECD members' publicly stated desire for 'change through dialogue and consensus'. The tax project will get much further if small and developing economies are involved fully in the development of new standards."

The ITIO currently comprises Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Cook Islands, Malaysia, St Kitts & Nevis, St Lucia, Turks & Caicos and Vanuatu. The Commonwealth Secretariat, Pacific Islands Forum Secretariat and CARICOM Secretariat have observer status.

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