24 March 2003
Europe
threatening OECD’s plans to swap tax information
As
EU ministers delay savings tax directive, small states
call for urgent meeting with OECD over embattled level
playing field
Friday’s
decision by European Union (EU) heads of government
to postpone adoption of their savings tax directive
does not lift the threat posed to the Organisation
for Economic Cooperation and Development’s (OECD’s)
own initiative to increase the transparency of financial
transactions.
The
proposed EU directive ignores an OECD commitment not
to favour its own members over small states. The International
Trade and Investment Organisation (ITIO) believes
the OECD should call an urgent meeting to discuss
the implications.
“As
matters stand, the OECD’s ‘harmful tax
competition’ project appers compromised and
its future in doubt,” says ITIO
Chairman Glenroy A Forbes in a letter to OECD Secretary-General
Don Johnston. Mr Forbes is also Financial Secretary
of the British Virgin Islands,
“The
implementation of the savings tax directive currently
under discussion by EU countries, all of whom are
OECD members, may violate the OECD’s commitment
to a level playing field,” explains
Mr Forbes, “The EU action also represents
a major challenge to the OECD’s own principles
of transparency and exchange of information.”
The
ITIO Chairman is calling for an urgent meeting of
the OECD’s Global Tax Forum to discuss the impact
of the EU directive. The OECD has already conceded
that the EU directive may undermine its own tax project,
yet has not called a meeting of the Forum to review
the situation.
“Adoption
of the EU directive has been delayed. This provides
a breathing space for an OECD meeting to take place”,
Mr Forbes added today.
Last
year, by promising a level playing field (non-discrimination)
between members (including all EU countries) and non-members,
the OECD encouraged numerous small countries, including
most ITIO members, to commit to exchanging tax information
on request from 2006.
However,
the proposed EU saving tax directive flies in the
face of the OECD promise by giving four OECD members
– Austria, Belgium and Luxembourg and Switzerland
– a competitive advantage over non-OECD countries
by allowing them to defer exchanging information until
2011 or later.
The
ITIO represents 16 small and developing states working
for a level playing field in the trade in services.
NOTES
TO EDITORS
1.
ITIO Chairman Glenroy A Forbes’s letter to OECD
Secretary-General Don Johnston is below.
The
ITIO
2.
The International Trade and Investment Organisation
(ITIO) was founded in March 2001 and groups 16 small
and developing states across Europe, the Caribbean,
Pacific, Latin America and Asia. It works for a level
playing field in the trade in services, particularly
in the development and implementation of new regulatory
standards.
3.
Members are Anguilla, Antigua & Barbuda, Bahamas,
Barbados, Belize, British Virgin Islands, Cayman Islands,
Cook Islands, Isle of Man, Labuan (Malaysia), Panama,
St Kitts & Nevis, St Lucia, St Vincent & The
Grenadines, Turks & Caicos and Vanuatu.
4.
The Commonwealth Secretariat, Pacific Islands Forum
Secretariat, CARICOM Secretariat, Caribbean Development
Bank and Eastern Caribbean Central Bank have Observer
status.
The
EU savings tax directive and the OECD “harmful
tax competition initiative”
5.
The ITIO is asking for a meeting of the OECD Global
Tax Forum to be specially convened to discuss the
impact of the EU savings tax directive on the future
of the OECD’s “harmful tax competition
initiative”. The Forum comprises OECD members
and the 31 small and developing countries that have
committed to working with the OECD to develop new
international standards for transparency and effective
exchange of information.
6.
These countries’ commitments were predicated
on the basis of a level playing field between
themselves and all OECD member countries, including
the 15 OECD countries that are also European Union
member states.
7.
The fact that four OECD members, Switzerland, Luxembourg,
Portugal and Belgium, who are among the “offshore”
world’s principal “onshore” competitors,
were allowed to opt out of the OECD process has already
raised questions about the level playing field.
8.
The proposed EU directive makes matters worse.
It would require EU tax authorities automatically
to exchange information on savings income. However,
Austria, Belgium and Luxembourg have been offered
an effectively open-ended transitional period in which
they would instead impose a withholding tax on savings
until such time as other “tax havens”
– including Switzerland, the USA, Liechtenstein,
Monaco and Andorra – introduced “equivalent
measures”.
9.
At a meeting on Friday 21 March, EU heads of government
failed to overcome last-minute objections by Italy.
A new date has not been announced for adoption of
the directive.
10.
OECD Secretary-General Donald Johnston protested in
a letter to the Greek Presidency of the EU in mid-January
that the savings tax directive could damage the OECD’s
project. “If some OECD countries were to receive
more favourable treatment as a result of the EU negotiations,”
Johnston warned, “this could lead [committed
jurisdictions] to withdraw their commitments.”
Commonwealth Secretary-General Don McKinnon has also
raised objections.
11.
The governments of Antigua & Barbuda, the Cayman
Islands, Panama and St Vincent & The Grenadines,
along with other heads of government in CARICOM, have
stated they will not participate in any further work
of the OECD Global Tax Forum until there is a meeting
to discuss the issue of a level playing field.
19
March 2003
Mr
Don Johnston
Secretary-General
Organisation for Economic Cooperation and Development
2, rue André Pascal
F-75775 Paris Cedex 16
FRANCE
Dear
Secretary-General
Request
for meeting to discuss impact of EU directive on OECD
level playing field
Following
the ninth meeting of the International Trade and Investment
Organisation (ITIO) in Panama City on 15 March 2003,
I am writing to you in my capacity as ITIO Chairman
and on behalf of ITIO members to request a strictly
focused meeting of the Global Tax Forum to discuss
the matters set out below.
As
you know, many ITIO members have entered into commitments
with the OECD to develop measures on transparency
and the exchange of information in criminal and civil
tax matters.
These
commitments depend on OECD countries implementing
a level playing field. This requires OECD members
to introduce the same measures within the same time
limits.
The
ITIO rejects the OECD’s preferential treatment
of certain OECD and non-OECD financial centres. It
also believes OECD countries should not impose sanctions
on non-OECD members when they refuse to do so for
OECD members.
We
regret, too, that, in violation of international law
and WTO rules, countries both within and outside the
OECD are already taking discriminatory measures against
small countries, including ITIO members, on the basis
of criteria developed by the OECD.
The
ITIO is concerned that the implementation of the savings
tax directive currently under discussion by EU countries
– all of whom are OECD members – may further
violate the OECD’s commitment to a level playing
field. The EU action also represents a major challenge
to the OECD’s own principles of transparency
and exchange of information.
As
matters stand, the OECD’s “harmful tax
competition” project appears compromised and
its future in doubt.
The
ITIO calls on the OECD to hold an urgent meeting of
the Global Tax Forum exclusively to address these
specific concerns.
Yours
sincerely
Glenroy
A Forbes
Chairman,
ITIO
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