6 July 2001
ITIO welcomes New Zealand opposition to OECD sanctions

The International Tax and Investment Organisation (ITIO) has welcomed New Zealand’s opposition to proposed sanctions by the Organisation for Economic Cooperation and Development (OECD) against small and developing economies.

New Zealand’s Finance Minister, Dr Frank Cullen, said in a radio interview yesterday (Thursday 5 July) that international sanctions should not be imposed on small nations accused of being tax havens and money laundering centres.

A confrontational approach could be counterproductive, he said. He added that, while it was important to eradicate abuse, “We’re not going to see excessively heavy-handed action taken against poor countries which have great difficulty generating economic growth”.

Dr Cullen will press other countries to take the same approach. He raised the matter yesterday in a meeting with UK Chancellor of the Exchequer (Finance Minister) Gordon Brown.

ITIO Spokesperson Ben Coleman commented: “We welcome New Zealand’s concern about the OECD’s sanctions threat. It is not acceptable for developing countries to undermine the sovereignty of small states through a course of intimidation.

“The OECD’s tax project would have a better chance of success if it involved small and developing economies as equal partners. The OECD should lift its sanctions threat and move towards inclusive dialogue.”

For further information, please contact Ben Coleman in London on Tel: +44 (0) 20 7526 3603, or Tel: +44 (0) 7958 616 444, or Email: media@itio.org

NOTES TO EDITORS

1. On 28 June, OECD ambassadors approved a revised way forward for the tax initiative. Leaked reports suggest the OECD will delay the deadlines for signing up to its initiative and for OECD members to consider imposing sanctions. (Spain is holding up publication of the revised approach while it pursues its ongoing dispute with the United Kingdom over the status of Gibraltar.)

2. The OECD was forced to revise its approach after US Secretary Paul O’Neill expressed the USA’s serious reservations with the initiative on 10 May.

3. While welcoming the sanctions delay, the small and developing economies (SDEs) are concerned that the revised approach as leaked still does not address the key question of involving them fully in the process.

4. One way for the OECD to work with the SDEs in partnership would be to open up its Global Tax Forum to them on an equal basis.

5. The OECD has consistently been criticised for the top-down, dictatorial way in which it has run its initiative. Following a Joint OECD-Commonwealth meeting in Barbados on 8-9 January, OECD members decided to open up their Global Tax Forum to all jurisdictions that showed a genuine interest in curbing harmful tax practices. In practice, such interest was taken to mean a commitment to the broad principles of transparency, non-discrimination and exchange of information.

6. Although all the 35 SDEs targeted by the OECD have agreed to these principles, they have been excluded from the Forum unless they sign up to detailed agreements with the OECD. Only seven have done so.

7. Meanwhile, the OECD has encouraged over 55 other non-member countries, such as Argentina and South Africa, to participate in the Global Tax Forum on the basis that they accept the OECD’s broad principles. Unlike the small and developing economies - who have also accepted the broad principles - these countries have not been required to make detailed commitments to the OECD process as a precondition for participation.

8. The International Tax and Investment Organisation (ITIO) was set up in March 2001 to help SDEs respond to global tax and investment challenges. It explicitly considers the development implications of these challenges.

9. The ITIO currently comprises Anguilla, Bahamas, Barbados, Belize, British Virgin Islands, Cayman Islands, Cook Islands, Malaysia, St Kitts & Nevis, St Lucia, Turks & Caicos and Vanuatu. The Commonwealth Secretariat, Pacific Islands Forum Secretariat and CARICOM Secretariat have observer status.

10. The ITIO grew out of the work of the OECD-Commonwealth Joint Working Group on Harmful Tax Competition. The experiences of the SDEs in this group convinced them of the need for a new, inclusive organisation.

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