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OECD Claims Success At Abolishing 'Harmful' Tax Regimes

by Ulrika Lomas,, Brussels

27 September 2006

The Organisation for Economic Cooperation and Development (OECD) claims to have made significant progress in persuading its members to abolish harmful tax regimes since the publication of its 2000 report on global tax cooperation.

In its 2006 progress report, which follows on from a similar report published in 2004, the OECD said that of the 47 preferential tax regimes identified in 2000 as being "potentially harmful," 19 regimes have been abolished, 14 have been amended to remove their potentially harmful features, and 13 were found not to be harmful. Only one was still considered harmful, which was part of Luxembourg's 1929 holding company regime.

The Committee reviewed holding companies and similar preferential regimes in a number of member countries and determined that the regimes of Austria (as amended), Belgium, Denmark, France, Germany, Greece, Iceland, Ireland, Luxembourg (participation exemption), Netherlands, Portugal and Spain were not harmful.

There were only three regimes on which the Committee did not reach a conclusion at the time of the 2004 Progress Report: the proposed Belgian co-ordination centre regime, the Swiss “50/50 practice,” and the Luxembourg 1929 holding company regime.

Subsequently, Belgium informed the Committee at its June 2005 meeting that the proposed co-ordination centre regime would not be put into effect. As a result, the Committee considered the regime withdrawn. Switzerland also informed the Committee that it had withdrawn the Circular that authorised the 50-50 practice.

Concerning the Luxembourg 1929 holding company regime, the Committee noted that amendments to the regime had been made in 2005, but concluded that the amendments did not address the concerns of the Committee relating to the harmful feature of lack of effective exchange of information and that the regime was therefore still considered 'harmful'.

Paolo Ciocca, Chair of the OECD’s Committee on Fiscal Affairs, said that the latest progress report shows how the group has made "real progress" in it mission to stamp out harmful tax practices on a global scale.

“OECD countries embarked on a difficult challenge when we commenced our work on countering harmful tax practices and this report reflects the success we have had in bringing about change," he commented.

However, he indicated that the OECD does not yet consider its mission complete.

"Further work is required to fully implement the standards we have set so that national tax laws in countries large and small can be fairly and effectively enforced. I look forward to more rapid progress in this area," he stated.

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