Brussels 04 April 2001

European Think Tank Criticises OECD
For 'Unfair Tax Competition' Initiative

     An influential European think tank with offices in London and Brussels has issued a report condemning the OECD's 'harmful tax competition' offensive as unfair and opaque. 

     The cross-party European Policy Forum says that the OECD's initiative fails to meet reasonable international standards of accountability, transparency and Parliamentary and judicial oversight, that it has opaque adoption procedures and risks unfair and unequal enforcement.

     Two prominent UK academics have authored the report: Professor Richard Rose FBA is Director of the Centre for the Study of Public Policy, University of Strathclyde, while Professor Edward C Page is Director of the British ESRC Programme on Future Governance and Beatrice & Sydney Webb Professor of Public Policy at the London School of Economics.

     The report says that the OECD's plan, designed to oblige low-tax countries to sign a Memorandum of Understanding with the OECD with a deadline of July 2001 "is a clear example of pseudo-law being created without the scrutiny to which national laws are subject and it shows sanctions being applied to non-signatory states without any right of appeal to a tribunal on findings of fact or interpretation".

     "The Organisation's Fiscal Affairs Committee is dominated by civil servants representing national fiscal and revenue authorities. Fiscal affairs ministers ultimately endorse its recommendations, but do not scrutinise it as a parliament could" say the authors.

     The study, Lawmaking Through the Back Door, which can be obtained through the Forum's web-site at www.epfltd.org, says "international agencies are now trying to expand their impact by turning what in the past were recommendations or guidance into pseudo laws with tough sanctions".

     "The OECD is not the only body that promulgates rules without consultation with national Parliaments. The same is true, for example, of the United Nations. However, parliamentary scrutiny of issues dealt with by national representatives in the UN Security Council and General Assembly is much greater."

     "Nor is the OECD the only international body without a representative Assembly debating issues in public; the same is true of the International Monetary Fund and the World Bank. However, both the Bank and the Fund bargain at length with countries before recommending decisions, whether granting funds for development or making loans subject to stringent conditions. The OECD has moved from recommendations of good practice to bargaining in this way with non-member states without any formal increase in its powers."

     "Organizations such as OECD and the IMF are very difficult to challenge through courts. Multilateral negotiations between national governments and multi-level games between national and intergovernmental agencies creates an accountability chase through a maze of institutions" say Professors Rose and Page.

     The study recommends new scrutiny and accountability procedures for agencies which operate outside traditional judicial supervision.

     "The distinctive feature of European Union law is that the process of adaptation, scrutiny, accountability and enforcement involves negotiations with policymakers accountable to 15 national parliaments and, in some circumstance, co-decision with the European Parliament too. It is now time to align the structures of international agencies like the IMF, World Bank and OECD with EU best practice".

     The report recommends that national legislatures should be notified before such rules are adopted and given the chance to comment. "Affected parties that believe a draft rule does not adequately take their interests into account can then address affected representatives to advance their objections."

     There should be access to independent courts or tribunals. "If those alleged to have acted contrary to a published rule can reply to allegations in a hearing before an independent tribunal, due process has been respected. As intergovernmental bodies such as the IMF, the World Bank and the OECD extend their 'advice' into pseudo-laws, new protections should be developed, which may require new international agreements'"

     Unequal enforcement should be addressed by proper audit. "Periodic audit of what member states do can ascertain if a laggard country has implemented a measure or if there are gross discrepancies in the ways by which a common rule is enforced by different member states. The EU's Lisbon process to implement structural reforms of national economies is an example of what may be done, using scoreboards and fast track procedures to monitor actions".  National governments can help

     But the authors recommend that countries and businesses affected by OECD-type initiatives must seek the help of national governments in their struggle.

     "Instead of turning to international lawyers, those aggrieved must put political pressure on national governments and on coalitions of national governments that share their interests".

     For further information: Graham Mather, President, European Policy Forum  Tel: +44 20 7839 7565 (office) +44 7836 325133 (GSM)

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