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FT's International Wealth Management

January 5, 2001

Barbados hopes to swing
OECD approach on tax levels

     -1040 GMT, Jan 5-Barbados hopes its conference with the Organisation for Economic Co-operation and Development next Monday and Tuesday will signal a change in approach to the controversial issue of tax levels, writes James Mawson.

     Lynette Eastmond, director of international business for Barbados, said: "Our position (at the forthcoming consultation) is that matters of international tax and trade services should be dealt with in multi-national forums and not as an initiative by a group of countries deciding for independent states and selectively imposing their decisions without dialogue.

     "We hope the OECD will agree at some point in the future but it is probably too ambitious at this stage, although we hope the conference will signal a change of approach by them."

     Barbados is the host for the High Level Consultation next week, which will be attended by the Commonwealth, the OECD and other countries in the region that were affected by the 1998 OECD Report on Harmful Tax Competition.

     This report listed 35 "tax havens", which included Barbados, with a further six avoiding inclusion by making an advance commitment to co-operate with the OECD. However, Luxembourg and Switzerland, both OECD members, abstained and said they would not be bound by the OECD recommendations on the issue.

     According to the Barbados Ministry of Industry and International Business January Global e-Letter, the draft agenda for the conference contained the following items: * Globalisation: tax and related issues * The OECD proposal on harmful tax competition * Means of addressing concerns about harmful tax competition * Major policy and legal issues * Administrative and resource implications * Next steps: building confidence and a shared perspective * Economic impact on small and developing states

     Andrew Quinlan, president of the Center for Freedom and Prosperity, a US non-profit interest group against the OECD report and for tax competition and financial privacy, said: "It is ironic that the OECD is against the so-called tax havens because 25 to 30 years ago it had been actively encouraging the development of the financial services industry in these small countries as the only thing they could do."

     The CFP will host two briefings on the weekend before the conference, one for the OECD-targeted government officials and the other for the public. Mr Quinlan said: "We will say that the US is not necessarily behind the OECD on imposing economic sanctions on non-compliant countries and that if these countries want to give in then they should demand some things from the OECD in return."

     He said that the majority leader of the US House of Representatives, Dick Armey, was against the OECD proposals. In a letter to Larry Summers, US Treasury Secretary, in September 2000 Mr Armey said: "I am deeply concerned by the Administration's active support for the OECD's effort to stamp out tax competition. This effort is designed in effect to create a tax cartel and, if the OECD succeeds, our nation will face the risk of higher taxes and a weakened economy while developing nations will be hamstrung in their attempts to promote economic growth."

     Mr Armey's top tax aide, Elizabeth Tobias, will be present at the CFP presentation in Barbados.

     Mr Quinlan said that after talks with the Administration-elect under George W Bush, he expected it to be more outspoken on financial privacy and would take a different tactic on tax competition.

 

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