**Level Playing Field: Misguided and Non-Existent**
Yesterday in Washington, DC the Center for Freedom and Prosperity Foundation released a study documenting the absence of a level playing field between OECD and Non-OECD countries when it comes to divulging private financial data to foreign tax collectors. It says the “bureaucracy’s anti-tax competition project is floundering”.
CF&P concludes that this represents a major setback for the Paris-based bureaucracy’s anti-tax competition project, and explains why it views this as a positive development.
According to the study, *”low-tax regimes must aggressively defend tax competition as a liberalising force in the world economy”* since *”even OECD economists have widely written that lower tax rates and neutral treatment of capital are important contributors to economic growth.”*
Andrew Quinlan, President of the CF&P Foundation says *”The study sets the record straight once and for all that there is not a level playing field for the exchange of tax information between jurisdictions – and also explains that a level playing field based on bad tax policy would be deleterious to global economic growth.”*
See below for an executive summary provided by CF&P, as well as a link to the study, written by Dan Mitchell, Senior Fellow, the Heritage Foundation.
Last week in Ottawa, the OECD concluded a Global Forum on Taxation, expressly called to discuss how a global level playing field might be achieved.
At the conclusion of that Forum, a closing statement was issued, indicating that *”..virtually all participants reaffirmed their commitments to the principles underlying the exchange of information standard and acknowledged the need to continue their discussions to establish bi-lateral mechanisms for effective exchange of information.”*
Participants acknowledged, however, that a global level playing field does not yet exist and that further progress could and should be made to achieve it, so that *”all countries can reach the high standards which the participants wish to see achieved.”* (See separate Industry News article)
Subsequently, a Working Group has been established to develop proposals for consideration by the Global Forum for achieving a global level playing field and a process by which this work could be taken forward. The aim is to report back to the Global Forum in April 2004.
The Bahamas was represented at the Global Forum by Mrs. Rowena Bethel, Legal Advisor to the Ministry of Finance. The Bahamas — and other jurisdictions that have provided a conditional commitment to the OECD — viewed the recent meetings as important in light of a number of recent developments seen as having significant implications for the achievement of a level playing field.
**Executive Summary of CF&P Study**
For all intents and purposes, the Organization for Economic Cooperation and Development’s attempt to undermine tax competition has collapsed.
Many low-tax jurisdictions had made “commitments” to weaken their attractive tax and privacy laws after being threatened by the OECD with financial protectionism – but explicitly stated that those commitments were binding only if all OECD nations agreed to the same flawed rules (the famous “level playing field” requirement).
The European Union’s Savings Tax Directive might have satisfied that condition, but that tax harmonization scheme collapsed when the United States, the United Kingdom, Switzerland, and Luxembourg refused to agree to share confidential information about non-resident investors with foreign tax authorities. This is a positive development for the world economy.
Tax competition is a liberalizing force in the world economy. Fiscal rivalry helps lower tax rates and helps reduce discriminatory taxes on income that is saved and invested, and even OECD economists have widely written that lower tax rates and neutral treatment of capital are important contributors to economic growth.