23 March 2001

Small and developing economies respond to OECD, pursue equal treatment, agree to continue working together

At a meeting in London on 21-23 March, the non-OECD members of the OECD-Commonwealth Joint Working Group on Harmful Tax Competition made significant progress on addressing common concerns about tax cooperation.

The meeting discussed the OECD's response to the group's proposal for a truly inclusive Global Tax Forum.

Speaking afterwards on behalf of the meeting, Lynette Eastmond of Barbados said, "Our position stresses the importance of all countries in the process, whether members of the OECD or not, receiving equity of participation and treatment. For example, as regards monitoring compliance with commitments, we are suggesting that a form of peer review be put in place which applies to non-OECD and OECD countries alike. This would build general confidence in the fairness of the process".

The meeting also agreed to put in place structures to enable small and developing economies (SDEs) and others to continue working together on international tax and investment issues, with a particular focus on development impacts.

Finally, the meeting agreed to remind the OECD of its undertaking to provide written answers to seventeen points of clarification sought by non-OECD countries and discussed at the previous meeting of the Joint Working Group in Paris on 1-2 March 2001.

For further information, please contact Ben Coleman
(Tel. +44 20 7526 3603, + 44 7958 616 444)

EXPLANATORY NOTES


• Following recognition late last year that it needed to improve the quality of its dialogue with small and developing economies (SDEs) on "harmful tax competition" matters, the OECD held regional meetings in Barbados in January 2001 and in Tokyo in February 2001. At the Barbados meeting, it was agreed to set up a small Joint Working Group to explore ways of taking matters forward.

• The Joint Working Group is co-chaired by Rt Hon. Owen Arthur, Prime Minister of Barbados, and Mr Tony Hinton, Australia's Ambassador to the OECD. It has met twice: first in London on 26-28 January and second in Paris on 1-2 March.

• At the Paris meeting, the SDEs formally restated their desire for a truly inclusive Global Tax Forum. The OECD maintained reservations on some aspects of the SDE proposal and offered to draft a revised proposal. This draft formed the basis of discussion at the London meeting this week.

• The OECD has unilaterally named 35 small and developing economies (SDEs) as potential "tax havens" and has demanded they commit by July 2001 to amending their systems or face (as yet unspecified) sanctions. SDEs insist they should receive no less favourable treatment than OECD member countries. They note that, although the OECD has also identified "harmful" tax practices among its own member countries, such as Switzerland and Luxembourg, it has given them until 2003 to decide their response. Other non-OECD countries, such as Hong Kong, also fit the OECD's harmful tax practices criteria yet have somehow escaped being listed.

• SDEs also fear that, if they are forced to close down their offshore centres, they will suffer significant economic damage, and business will just shift to bigger centres, which may be located in OECD countries. This feeds concerns about whether the OECD is seeking a level playing field.

• Commentators often confuse the OECD's remit and that of other bodies. The OECD's remit does not extend beyond tax matters. The separate Financial ;Action Task Force has the remit of dealing with money laundering issues, the Financial Stability Forum examines ways of strengthening the global financial architecture, and so on. The exchange of types of information other than tax information is not an OECD matter.

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