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Small Nations Still Face Uneven Tax Playing Field

by Amanda Banks, Tax-News.com, London

02 June 2006


Negotiation of agreements between countries that provide for the exchange of tax information need to proportionately benefit nations of all sizes, argues the International Trade and Investment Organisation (ITIO), a group which represents the interests of offshore financial jurisdictions.

"Small nations are still disadvantaged when it comes to negotiating tax related treaties and agreements," said Brenda Heather Latu, representing Samoa, the current Chair of the ITIO, in response to a report published Monday by the Organisation for Economic Cooperation and Development's (OECD) Global Forum on Taxation.

The OECD's report stated that important progress has been made towards a global level playing field, although it argued that more progress can be made to improve global tax transparency, and stated that some countries still place constraints on international co-operation to counter criminal tax matters and a number continue to impose strict limits on access to bank information in civil tax matters.

Ms Latu noted that many ITIO members actively participated in the OECD's review of legal and administrative frameworks providing for transparency and exchange of tax information in more than 80 countries. She also explained that the exchange of tax information between countries has traditionally been covered in what are known as double taxation agreements (DTAs). There are more than 2,000 DTAs in existence.

"Small and developing countries are frequently excluded from or not given the opportunity to participate in such treaty networks because they do not have the economic influence of larger nations - specifically in such areas as trade and export of commodities or resources," noted Ms. Latu.

"This becomes a 'vicious circle' in which the economic influence of small and developing countries is held back by being excluded from treaty networks," she observed.

Ms. Latu stated that what has emerged is a "two tiered system" in which larger and more developed countries offer DTAs to each other and certain other nations - like those which have sought-after natural resources such as oil - while smaller and developing countries are subject to a, "second-class arrangement in the form of stand-alone tax information exchange agreements, which do not provide the types of benefits found in DTAs."

Malcolm Couch, ITIO Deputy Chair and Isle of Man representative, commented that: "ITIO members will continue to actively advance our position individually, in our bilateral relations and collectively."

"We look forward to the next step in the ongoing process of creating a level playing field which will involve reviewing what is done in practice and therefore what impediments exist to the exchange of tax information between all countries," Mr Couch added.

Shawna Brisbane representing St. Kitts, and ITIO's Secretary, said that both members and non-members have "worked diligently" to put in place the necessary legal and administrative frameworks to support agreements which include provisions for the effective exchange of tax information.

"Our members continue to be open and willing to negotiate appropriate bilateral agreements that promote a common framework for transparency and tax information exchange around the world and which provide for competition on a level playing field," she stated.

Formed in 2001, the ITIO works for a level playing field in the trade in services, particularly in the development and implementation of new regulatory standards. This includes, but extends beyond, taxation issues and entails dealing with a wide range of international bodies. The body is funded entirely by its members.

The ITIO members are: Anguilla, Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Cook Islands, Isle of Man, Panama, St Kitts & Nevis, Samoa, St Lucia, St Vincent & the Grenadines, Turks & Caicos and Vanuatu. The Commonwealth Secretariat, CARICOM, Pacific Islands Forum, Caribbean Development Bank and Eastern Caribbean Central Bank have Observer status.


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