Improving the process in the harmful tax practices work

OECD Observer

The OECD is inviting jurisdictions identified as tax havens that are interested in co-operation with the OECD Member countries to endorse a collective memorandum of understanding designed to eliminate harmful tax practices.

The proposed collective instrument, agreed at a meeting of the OECD's Forum on Harmful Tax Practices in Paris, would be available as an alternative to bilateral agreements between the OECD and individual offshore jurisdictions. The OECD’s intention is that both processes should be equally open and transparent and proceed at the same pace.

Some 23 of the 35 previously identified jurisdictions have already contacted the OECD’s Forum on Harmful Tax Practices with a view to co-operating in the drive against illegal and unfair tax practices. Speaking at a media briefing in Paris, Bruno Gibert, Director of the International Taxation Division of the French Ministry of Finance and one of the Forum’s two co-chairs, said the OECD countries are "very pleased" with the response so far to the OECD’s initiative.

Several of these jurisdictions have made excellent progress on formal commitments to work with the OECD to address the issues raised by harmful tax practices. Others are also making good progress but may need more time to complete their commitments. In the coming months, the OECD will approach jurisdictions that have not yet contacted the Forum, with a view to seeking their co-operation as well.

Earlier this year, the OECD announced that Bermuda, the Cayman Islands, Cyprus, Malta, Mauritius and San Marino had made commitments to co-operate with the OECD to fight harmful tax practices. The OECD has set a deadline of July 2001 for reaching similar agreements with other offshore jurisdictions. Failing such agreements, tax havens face the prospect of becoming targets of defensive measures on the part of OECD countries, possibly including the abrogation of bilateral tax treaties and enhanced auditing requirements for transactions between residents of OECD countries and persons or institutions resident in such unco-operative tax havens. Philip West, International Tax Counsel at the U.S. Treasury and the other co-chair of the Forum, emphasised, however, that the OECD’s objective is to avoid having to introduce defensive measures against any jurisdictions. "Our ultimate goal is to have a list of unco-operative tax havens with no names on it," he said.

With this in mind, the OECD announced plans for a conference on harmful tax practices in the Asia/Pacific region in February and said that it is examining plans for a similar conference in the Caribbean. The OECD will also invite representatives of jurisdictions that have already pledged to co-operate in combating harmful tax practices to a meeting in Paris in November to elicit their views on the subject of achieving effective exchange of information.

In parallel, the OECD is continuing to examine the problems posed by potentially harmful preferential tax regimes in its own Member countries. In June, the OECD announced a list of 47 such regimes. These are now being subjected to detailed examination to assist the commitments made by OECD countries in 1998 to eliminate harmful aspects by 2003.

©OECD Observer October 2000 

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