U.S. DROPS OBJECTIONS TO OECD TAX HAVEN CRUSADE

Reuters (Paris), 13 June 2001

By Joelle Diderich

The United States swung back in favour of an international campaign against tax havens and money laundering on Wednesday after talks in Paris eased its concerns about meddling in other countries’ tax policies, officials said.

The U.S. drew criticism from France and other industrialised nations last month after backing away from a drive by the Organisation for Economic Co-operation and Development (OECD) to make tax havens respect internationally promoted standards.

The OECD has been running a crusade against tax havens - many of them exotic islands with sophisticated offshore banking centres - and threatening possible sanctions against them.

But its united front threatened to crumble after new U.S. Treasury Secretary Paul O’Neill wrote in May that Washington was worried the drive could be seen as an attempt to make low-tax countries raise their taxation levels.

U.S. officials have since insisted that President George W. Bush was as keen as anyone to fight “hot money”.

“I think the United States...has made it very clear that the OECD project is a very useful one for getting information and finding ways to exchange information so that each country can enforce its tax laws,” U.S. Treasury Under-Secretary for International Affairs John Taylor told reporters on Wednesday.

He said top U.S. trade and economic envoys had been able to clear their concerns in a meeting with their counterparts from the 29 other wealthy industrialised countries in the OECD.

“The issue where there has been more discussion is on whether countries should be able to set their tax rates as they see fit,” added Taylor, who did not take part in the tax talks but was holding separate meetings at the OECD.

“There had been a concern that one element of the discussions at the OECD had implicitly been instructing countries about their tax policy.”

U.S. BACKING OFF

Taylor, whose comments appeared to indicate a further case of the five-month-old Bush administration backing away from an initially unilateralist stance, said the talks would result “not in a softening, but a redirection” of OECD strategy.

An OECD spokesman confirmed the United States would not withdraw from the agreement. “The supposed U.S. withdrawal is not happening. There was a period when there were issues of interpretation, now they have been clarified,” he said.

One source close to the talks said the U.S. concerns appeared to have been based on a misunderstanding of the text.

However, an organisation that represents many of the small countries targeted by the OECD crusade said it did not believe Washington had dropped its all objections to the tax project.

“It would be wrong to infer that the U.S. no longer had concerns about aspects of the OECD’s initiative,” a spokesman for the International Tax and Investment Organisation (ITIO) said.

The OECD is expected to release its revised tax haven blacklist by the end of July.

It currently includes Panama, the Alpine principality of Liechtenstein and a string of sunshine islands like the Bahamas, the Cook Islands and the British and U.S. Virgin Islands.

The ITIO said it was promised clarifications about the OECD initiative more than three months ago but was still waiting.

“This shows a lack of good faith and makes it harder for small and developing economies to reach agreement with the OECD,” the spokesman said.

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