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International Money Marketing

July 3, 2001

OECD deadline pushed back as agreement reached with US

Offshore centres breathed a collective sigh of relief last month as the deadline for commitment to fair tax competition was pushed back to November 30 after a meeting of the organisation's fiscal affairs committee.

The news came as the original July 31 deadline loomed ever closer for jurisdictions who remained on the list of centres designated tax havens.

The whole process had at one point been thrown into doubt after US treasury secretary Paul O'Neill, warned that the OECD's work was contrary to the Bush administration's taxation and regulatory goals.

"I am troubled by the underlying premise that low tax rates are somehow suspect and by the notion that any country, or group of countries, should interfere in any other country's decision about how to structure its own tax system" he said in a recent newspaper editorial.

A source indicated, however, that an agreement had been reached between the OECD members and the US following several weeks of uncertainty regarding the fiscal position of the most powerful nation on earth.

Although much of the meeting remained shrouded in secrecy, it was indicated that the compromise may focus on the thorny issue of ringfencing, where a country's regulations provide favourable rates for international businesses.

The main emphasis would be shifted instead onto transparency and exchange of information, although these definitions may be amended.

The news is a victory of sorts for right wing lobby group the Centre for Freedom and Prosperity, which has consistently attempted to thwart the OECD's efforts by urging territories to resist the organisation's proposals. "Low-tax jurisdictions should not allow themselves to be bullied or misled," said president Andrew Quinlan in a CFP news bulletin.

However, the International Tax and Investment Organisation (ITIO), which represents the Caribbean territories, maintains the process is biased.

"It is manifestly unfair to exclude the countries most affected by the OECD project," says spokesperson Ben Coleman, "If the OECD still aims to arrive at workable agreements, they will first need to start involving (countries) equally and fully in discussions on the basis of true partnership."

 

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