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Daily Nation (Barbados)

Tuesday-13-February-2001

OECD Should Drop Threats Of Sanctions The Best File

by Tony Best

     "If we were engaged in constructive engagement in the middle of these counter-measures, we would not be able to ignore it and its implications."

     The "counter-measures" Owen Arthur, Barbados' Prime Minister, had in mind were the tough financial sanctions which the Organisation for Economic Cooperation and Development (OECD), is threatening to impose on dozens of Caribbean and Pacific nations and territories in July.

     He had every reason to complain not only about the threat of sanctions but the deadline as well. As the co-chairman of the nine-nation working party set up in Barbados in early January to try to resolve the dispute between the OECD and countries on the rich nations' blacklist, he had just completed presiding over a three-day meeting in London of countries which included Ireland, Antigua, Britain, Cook Islands and the Netherlands to Vanuatu, Malaysia, Malta, Barbados, Australia and the British Virgin Islands. 

     While they were searching for a solution, the sanctions were hanging over the heads of the small countries. And the OECD wasn't budging when asked to lift the threat. 

     As a sign of good faith, the OECD should drop the deadline and remove the threat. After all, the organisation has already admitted that it made serious mistakes in the way it went about preparing its list of "tax havens" that would be penalised if they don't fall into line.

     Commonsense should prevail. If the OECD admits that its process was flawed from the get-go, then all of the things which flowed from it, the sanctions, the rules and regulations it wants the islands to follow and the Memorandum of Understanding it was to force the various offshore financial jurisdictions to sign, must also be flawed. 

     It's about time that it comes to term with its folly, high-handedness and double standards.

     Tony Hinton, Australia's ambassador to the OECD and co-chairman of the working Party, admitted in London that the organisation had blundered when it failed to discuss the issue of harmful tax practices with the various countries before the proposed rules and the threats were made.

     "We could have handled better the consultation and dialogue on the OECD. That was something we recognised after Barbados," was the way Hinton put it in London a few days ago. 

     About three weeks ago, Gabriel Makhlouf, chairman of the OECD's Global Forum on Taxation and one of Britain's top tax experts, had used the meeting in Barbados to make a somewhat similar statement and to apologise to the smaller countries for the organisation's approach.

     But why is the OECD holding out? 

     A possible explanation is arrogance. The OECD feels it can push around smaller nations and don't have to worry about the consequences. After all, what can the Cayman Islands, the Bahamas, Dominica, St. Vincent. St. Lucia, Grenada, Tonga or Barbados, either acting individually or together do to the United States, Japan, Italy, New Zealand, France or Sweden?

     Answer: precious little. 

     Another reason for the hard-line and unreasonable attitude is that the OECD has found itself in the embarrassing position of having to defend itself against charges that its approach was riddled with hypocrisy; meaning that while it was telling the world that the small countries were sanctuaries which gave money launderers free rein to operate, the United States, Britain, Switzerland and France were being classified as the world's leading centres for the cleaning of illegal money. Yet the rich countries were never blacklisted or threatened with penalties. 

     After smearing so many small countries, the OECD obviously feels it can't lift the deadline and the threat of sanctions because it would give the blacklisted victims bragging rights. It would allow them to say that it was a case of David slaying Goliath.

     But this is not about bragging rights or stories about the small defeating the large. Instead, it's about the economic development of the blacklisted states. 

     St. Lucia's Prime Minister, Dr. Kenny Anthony, and his counterpart in St. Kitts-Nevis, Dr. Desmond Douglas, have insisted all along that the OECD action wasn't motivated by a desire to end money laundering as the then United States Treasury Secretary, Larry Summers, and Britain's Chancellor of the Exchequer, Gordon Brown, had claimed.

     Instead, it was simply to shut down the competition, which the industrialised nations were facing from the islands. 

     As they are probably saying among themselves, climbing down by backing off the sanctions and the deadline would be more than the United States, Britain, Japan, the Netherlands and the other industrialised country can take.

     This is where the new Bush administration can show that it really means business by turning over a new policy leaf. The top economic advisor in the White House, Larry Lindsey, and the Secretary of the Treasury, Paul O'Neil, can put a fresh stamp on tax policy in the United States, by ending the Clinton administration's effort to dictate tax policy to sovereign nations in the Caribbean and the Pacific. 

     This entire dispute is about raising taxes and about competition in financial services and it's about time that the OECD admits it.

 

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