TAX HAVENS DEMAND ACTION FROM OECD MEMBERS

March 3 2002

International Tax Review (Legal Media Group, part of Euromoney plc)

By Emma Barraclough

A number of tax havens signing up to the OECD's initiative on harmful practices have warned that their commitments are conditional on the group of rich nations tackling their own onshore tax havens.

Over the last two weeks the OECD has published commitments from jurisdictions including Jersey, Guernsey, and St Vincent and the Grenadines - three of the havens calling for a level playing field along with others such as Antigua and Barbuda, and the Isle of Man - with OECD officials negotiating behind the scenes with a number more.

The jurisdictions have committed to boosting tax transparency and their information exchange regimes to meet the OECD's February 28 deadline. Countries that fail to commit will be held to be uncooperative regimes and face counter measures from OECD member states.

But Ben Coleman, spokesman for the International Tax and Investment Organization, which represents a number of tax havens, was keen to point out many of the commitments given to the OECD are contingent on the developed countries tackling their own low-tax jurisdictions.

Four OECD member states - Switzerland, Portugal, Belgium and Luxembourg - have abstained from the harmful tax practices initiative.

Coleman said some of the members of the International Tax and Investment Organization identified by the OECD as tax havens were concerned they will be shut down to help the OECD club.

Vanuatu is so far the only jurisdiction to have publicly refused to commit to the OECD's initiative.

An OECD spokesman said it was mistaken to argue that Switzerland, Luxembourg, Portugal and Belgium were not taking part in the harmful tax initiative. He said Switzerland and Luxembourg, the two OECD members that had been named as having potentially harmful tax regimes, would have to decide whether to remove those regimes by April 2003, the same time that uncooperative regimes face the threat of coordinated counter-measures.

Wendy Warren, chair of the Bahamas Financial Services Board, has told the group of rich nations: "It would be entirely unreasonable for the OECD to ask smaller nations to change their business environment before their biggest OECD and non-OECD competitors - such as Delaware, Switzerland and Singapore - have agreed and implemented similar changes. We must be doing the same things at the same time."

Ian Kelly, Isle of Man tax assessor, said: "Our commitment to transparency and exchange of information on request, and the implementation of the legislation we have prepared, are naturally conditional on both OECD members and non-OECD countries adopting a similar approach."

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