Recent statements coming out of the Office of the US Treasury would indicate that the US is taking the position that the OECD initiative on harmful tax competition is too broad and not in line with the current US Administration’s tax and economic policies. It was clearly stated, too, that the United States does not support efforts to dictate to any country what its own tax rates or tax system should be, and will not participate in any initiative to harmonise world tax systems.
The release from the US Department of the Treasury said the work of the OECD initiative “must be refocused on the core element that is our common goal: the need for countries to be able to obtain specific information from other countries upon request, in order to prevent the illegal evasion of their tax laws by the dishonest few. While maintaining the importance of a multi-prong strategy enabling the US to make every effort, on its own, to obtain the necessary information to enforce US tax laws, the Department firmly stated its position against over-broad information exchanges in which foreign governments seek information for improper purposes or without proper safeguards. Note was taken, however, that organizations like the OECD can be used to build a “framework” for exchanging specific and limited information necessary for the prosecution of illegal activity.
Commenting on the Treasury News release issued by the US Office of Public Affairs, the Chairman of the Bahamas Financial Services Board felt this confirms a flaw by the OECD in the harmful tax initiative process, specifically referencing industry’s repeated call for a level playing field. Mr. Fair also pointed out that despite the fact that the majority of countries in the world are moving to a lower tax regime, some European countries remain intent on creating a situation where they can impose their tax systems on others. The BFSB Chairman also reiterated earlier calls for bilateral agreements as a means of dealing with the ongoing OECD initiative.
The OECD’s1998 Report in fact recognised that it is difficult for individual countries to combat effectively the spread of harmful preferential tax regimes, and recommended a coordinated approach, including dialogue with non-member countries, to achieve the “level playing field” which is so essential to the expansion of Global growth.
In commenting on The Bahamas’ ongoing dialogue with the OECD, Finance Minister Sir William Allen has said publicly that once one gets past the awkward question of the legitimacy of the authority OECD is exercising in acting as both rule-maker and judge in relation to sovereign states, the basis for dialogue would appear to be present. “There has clearly got to be some compromise and accommodation by both sides”, however.