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Tax-Privileged Free Trade Zones The OECD's Next Target

by Ulrika Lomas, Tax-News.com, Brussels

19 March 2018


In a new report, the OECD has drawn attention to criminal activity in free trade zones, which typically offer tax privileges and lighter regulation, highlighting that they may be unintentionally fostering growth in counterfeit goods.

With support from the EU's Intellectual Property Office, the OECD has released "Trade in Counterfeit Goods and Free Trade Zones," which finds that exports of counterfeit and pirated goods from a country or economy rise in parallel with the number and size of free trade zones it hosts.

Comparing growth in free trade zones, measured by the number of firms and employees in the zone, and customs seizure data from around the world, the report shows that establishing a new free trade zone is associated with a 5.9 percent rise in the value of counterfeit exports from the host economy.

"This is clear evidence that free trade zones are being used by criminals to traffic fake goods," said OECD Public Governance Director Marcos Bonturi. "We want this to be a call for action, and we will be working in the months ahead to help free trade zones step up their efforts to stop illicit trade, while at the same time maintaining their role as facilitators of legal trade."

There are more than 3,500 free trade zones, often located at key ports, in 130 countries or economies in North and South America, the Asia-Pacific region, Europe, and Africa, up from just 79 spread across 25 countries or economies in 1975. They have helped emerging economies to attract foreign investment and generate jobs and growth.

Another OECD report published earlier this month, Governance Frameworks to Counter Illicit Trade, pointed to poor oversight of free trade zones, insufficient screening of small parcels and inconsistent penalties on shippers of fake goods as three key areas where lax policy is facilitating trafficking of fake goods.

TAGS: United Arab Emirates | tax | investment | business | trademarks | Intellectual Property | employees | international financial centres (IFC) | copyright | tariffs | Singapore | offshore | Hong Kong | United States | regulation | penalties | trade | Dubai | free trade zone | Europe | Asia-Pacific | Africa | South America

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