LOW-TAX JURISDICTIONS PRESS OECD TO ANSWER QUESTIONS ON FAIRNESS

Tax Notes International (Tax Analysts), 14 May 2001 (extract)

By Cordia Scott

Eight of the 35 low-tax jurisdictions, labeled as harboring "harmful" tax policies in a June 2000 OECD report, have quietly banded together in a new group to respond in a unified voice to the global challenges each of them is facing. The multilateral body, which grew out of the work of the OECD- Commonwealth Joint Working Group on Harmful Tax Competition, calls itself the International Tax and Investment Organization (ITIO). Eight of the small and developing economies (SDEs) -- as the targeted low-tax jurisdictions like to call themselves -- formed the club in Paris in early March, during the second meeting of the joint working group of six OECD countries and seven non-OECD countries, to coordinate a response to the OECD blacklist….

While the group was created in response to the OECD's campaign against so-called harmful tax competition, it has become a forum for SDEs to seek international cooperation in a host of areas where the OECD is discussing rules -- such as electronic commerce and manufacturing. The OECD is expected to home in on investment incentives, which are key to the development of many countries seeking foreign investment….

The ITIO was formed by jurisdictions targeted by the OECD initiative, and those jurisdictions are interested in working with the OECD. "They understand that they need to meet high international standards. And they want to do that. But they want to be properly involved in the setting of those standards. And it isn't what's happening at the moment," said a spokesperson.…

Talks [with the OECD] may have stalled because of the ITIO's insistence on obtaining from the OECD written answers to 17 key questions the targeted jurisdictions posed just before the Paris meeting.… OECD officials present at the working-group meeting gave rough verbal answers to each of the questions, the ITIO spokesman said. However, Gabriel Makhlouf, the OECD's Committee on Fiscal Affairs chair, and Tony Hinton, Australia's ambassador to the OECD and co- chair of the working group, pledged that the OECD would soon after submit a formal written response. Now, two months later, the 31 July deadline is looming even larger on the horizon, yet the targeted jurisdictions haven't received any more information….

OECD Head of Fiscal Affairs Jeffrey Owens told Tax Analysts that the OECD orally answered the jurisdictions' questions at length during the second Paris working group meeting. Nevertheless, the OECD is planning to keep its commitment to provide written answers to the questions. It is working on refining the answers, which takes time, as the responses must first be approved by each of the 30 OECD member countries, Owens said.
Meanwhile, the ITIO has scheduled its next meeting to take place on 9-11 May in London -- the week before the OECD holds its annual ministerial council meeting in Paris. Three other Caribbean jurisdictions were expected to join the ITIO at that time. The unanswered 17 questions are bound to be one of the key topics of the ITIO's discussion. Another topic for discussion will be the ITIO's plan to bring before the World Trade Organization any OECD member country that tries to impose economic sanctions upon ITIO members.

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