Secretary-General Defends OECD Against Accusations Of Offshore Bullying

Mandy Robinson, Tax-news.com, London

06 March 2001

OECD Secretary-General, Donald Johnston, has said he is 'damn mad' at recent accusations made by Don McKinnon, head of the Commonwealth Secretariat, who said the OECD was acting like a bully against 'exotic island banking centres' in its campaign to stamp out tax evasion.

According to Reuters, Johnston said he was baffled by McKinnon's public attack last week: 'Don McKinnon, to whom I've talked many times including as recently as Monday, says the Commonwealth is fully onside with the objectives of this exercise... . I find it difficult to understand the position of the Commonwealth. They've told me repeatedly they share the same objectives as we do, which is essentially to eliminate tax evasion, illegal activity, the proceeds are often from criminal activity. It has nothing to do, basically, with bullying.'

In a statement released by McKinnon, he argued that the OECD's method of demanding that financial centres clean-up their acts or risk sanctions was akin to 'setting themselves up as the world's financial policeman.'

McKinnon said he had possession of an OECD document which he felt to be over the top. 'This ... clearly confirms,' he said, 'the suspicion of many that the (OECD) not only writes the rules, but wishes to be the prosecutor, judge, jury and jailor.'

Johnston said he was concerned that McKinnon's comments, which were released just as many offshore banking centre officials were meeting with the OECD in Paris last week, would damage the talks.

In a letter of complaint to McKinnon, Johnston wrote: 'A simple prior verification with me or any of my staff would have made this very clear. To issue a public statement without having made any attempt to verify the accuracy of the source is most inappropriate. Maybe some vested interests are playing a part in the ignorance of those who really don't follow the issues carefully. The position of OECD members is unassailable on this. Can anybody defend a lack of transparency, banking secrecy and illegal transactions?'

During a speech made last Thursday at a dinner for the OECD's Joint Working Group On Harmful Tax Practices, Johnston reaffirmed the organisation's position on global tax practices. He said the OECD's report and subsequent blacklist of those jurisdictions found guilty of harmful tax practices was not about tax harmonisation or keeping tax high. He explained: It is about fairness and transparency, it is designed to get at tax payers who cheat, tax payers who increase the taxes of their neighbours by illegally reducing their own. Usually, those who cheat by using clandestine, illegal operations are well off and are being subsidised by the hard working ... taxpayers in all coutnries. Often, apart from illegal tax evasion, the monies in question are derived from illegal and even criminal activities.'

He added: 'Those who are trying to stop this work and who characterise it as a heavy handed, insensitive approach by rich OECD countries imposing their will on others are, perhaps unwittingly, aiding tax cheats and criminals, and increasing the tax rates and tax burdens of the honest.'

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