… and the OECD acknowledges legitimacy of low tax jurisdictions

Arising from a Fall meeting in Malta, Commonwealth Finance Ministers mandated the Commonwealth Secretariat to facilitate “high level multilateral dialogue” on the issues raised by harmful tax practices. Subsequently, The Commonwealth Secretariat announced plans to cosponsor with the OECD Global Forum on Taxation a Conference in Barbados on January 8-9, 2001. Chairman of the OECD’s Committee on Fiscal Affairs, Gabriel Makhlouf said: “The conference in Barbados will provide a valuable opportunity to continue the dialogue with jurisdictions in the region, in order to develop genuine shared perspectives on how to eliminate harmful tax practices”.

Addressing the Commonwealth Finance Minister’s Forum, Head of Fiscal Affairs for the OECD Jeff Owens acknowledged the legitimacy of low or zero income tax regimes and denied that the organisation is attempting to create a tax cartel. The OECD is “not trying to impose our regimes on jurisdictions” and “we accept that each country has a sovereign right to determine its own rate of tax”. According to Mr. Owens, the OECD has no power to tell any government what it should do; at the end of the day, it is up to each government to decide how to proceed. The OECD reiterated its concern, however, that customer confidentiality and bank secrecy could be used to conceal illegal tax evasion.

Commenting further on the OECD’s “harmful tax practices” initiatives, Mr. Owens felt that the success of the project would increase, not reduce, the long-term viability of co-operative jurisdictions. He noted that “it will enhance their reputations and thereby encourage the development of sound financial activities within these jurisdictions”. A commitment to greater transparency, the equal treatment of resident and non-resident investors and a commitment to exchange information with other countries were not seen as steps undermining the ability of an offshore financial centre to compete.

The January forum is open to the governments of Commonwealth and OECD countries along with representatives from the IMF, WTO, World Bank, United Nations and regional organizations. The Commonwealth Secretariat has described the meeting as high-level multilateral talks. Its objective will be to consider early confidence building measures, and develop a shared perspective on the way forward.