THE 17 FUNDAMENTAL CLARIFICATIONS SOUGHT
FROM THE OECD ON 28 FEBRUARY 2001

The following paper was submitted by small and developing economies to the OECD on 28 February 2001, at a meeting in Paris of the OECD-Commonwealth Joint Working Group on Harmful Tax Competition.

At the meeting, OECD member countries gave brief verbal replies to some of the points. A written response was promised by Tony Hinton, Co-Chair of the meeting and Australia's Ambassador to the OECD, and by Gabs Makhlouf, Chairman of the OECD Fiscal Affairs Committee.

The OECD's promised response has still not been received and the OECD has not explained the delay.

THE SMALL AND DEVELOPING ECONOMIES of the Joint Working Group established at the Barbados High Level Consultations on the OECD Harmful Tax Competition Initiative reaffirm their belief that the proposal tabled by them at the London Meeting of the Group remains the optimal solution. This proposal envisaged a co-ordinated programme of action to develop and implement international standards in the area of cross-border taxation.

The small and developing economies wish to continue their genuine efforts to move the process of constructive dialogue forward.

A number of issues, raised in the 1998 Report entitled "Harmful Tax Competition - an Emerging Global Issue" (the 1998 Report) and the document entitled "Framework for a Collective Memorandum of Understanding on Eliminating Harmful Tax Practices" (the MOU), require clarification.

To enable the Group to continue work on the development of a politically acceptable commitment process as set out in the Barbados remit, these small and developing economies must be in a position to understand comprehensively the scope of the commitment sought by the OECD, as articulated in the annexed OECD interpretation of the three broad Principles of Transparency, Non-Discrimination and Effective Exchange of Information (the Principles), which was also tabled at the London meeting in January.

For this purpose, the small and developing economies would welcome an early and detailed and written response to the following questions:

1. In light of paragraph 6 of the 1998 Report which states that the report focuses on geographically mobile activities such as financial and other services, and having further reference to paragraphs 10 and 18 of the Report, could the OECD please confirm that the commitments being sought are confined in their scope only to geographically mobile financial and other services?

2. In light of paragraph 12 of the 1998 Report which states that the treatment of cross-border saving instruments, particularly bank deposits is not considered at this stage, please confirm the understanding that the affairs of individual physical persons (e.g. interest on bank accounts, portfolio investments and property holding) are not covered by the commitments?

3. Having reference to the Principles mentioned above, please confirm that all of the undertakings sought from the listed economies in relation to transparency, information exchange and non-discrimination are the subject of identical, specifically enumerated commitments given severally by OECD member countries?

4. Please provide specific cross-references in the 1998 Report to the express and detailed provisions of the Principles.

5. Please confirm:-

(a) that members of the OECD will implement any necessary programmes of reform to will enable them to comply with the standards set out in the MOU;

(b) what steps will be taken to monitor the effective implementation of such commitments by OECD members;

(c) that individual OECD member countries are prepared to apply the same defensive measures to non-complying OECD members as may be applied to any listed countries; and

(d) that failure of OECD members to comply with standards set out in the MOU will be grounds for the committed tax havens to resile from the implementation of the same commitments?

6. Is the OECD able to confirm that the transparency criterion (set out in the Principles) relating to governmental access to beneficial ownership and financial information would be satisfied if the government could obtain such access in the event of an investigation being initiated?

7. Is the underlying standard to which reference is made in the area of beneficial ownership information deemed to be satisfied through compliance with the Financial Action Task Force Recommendation 11 and more specifically to the Interpretative Notes to Recommendations 11 and 15-18? If not, to what alternative or additional standards should Working Group members have reference?

8. To what extent is the transparency criterion relating to access to bank information the same as the standard unanimously agreed among OECD countries as reflected in paragraph 21 of the report entitled "Improving Access to Bank Information for Tax Purposes" (OECD, Paris, 2000 at p. 14).

9. Can the OECD confirm that it supports the development of a Global Forum, in which ALL countries and economies which wish to participate and are committed to international co-operation in cross border tax issues, will be equal partners and that it will be this body through which agreement will be sought on international standards on cross border taxation (for example, in the definition of "civil tax matters" for the purposes of international tax information exchange agreements).

10. Can the OECD give a definition, as accepted by OECD member countries, of what is covered by the term "criminal tax matter"?

11. Can the OECD give a definition, as accepted by OECD member countries, of what is covered by the term "civil tax matter"?

12. Would the anticipated commitment to provide exchange of information in criminal tax matters be satisfied through the utilisation of procedures for the provision of mutual assistance in criminal matters? If not, why not?

13. Please confirm that the reference to the absence of impediments to the disclosure of exchanged information contained in the Principles is intended to operate only to permit such information to be utilised for matters falling within the scope of an arrangement relating to geographically mobile financial and other services.

14. Which OECD member states have identified and agreed their own harmful tax practices and what are those practices?

15. Which OECD countries have taken specific steps to remove identified harmful tax practices and what are those steps?

16. Could the OECD please outline its proposed programme for involving countries other than "tax havens" in the process of entering into and implementing the same commitments as committed "tax havens"? Is it expected that such countries will have implemented these commitments by the end of 2005. If not, when is the expected date and when would they be subject to any defensive measures if they remain uncommitted?

17. What action has been taken by the OECD members to identify and list any measures in their tax regimes which constitute "ring fencing" and what steps are being taken to eliminate such measures?

28 Feb. 2001

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