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Tax Notes International

March 1, 2001

Allegations of Underhandedness Emerge at
OECD's Harmful Tax Competition Meeting in Paris

by Trevor Drury and Chuck Gnaedinger,

     The OECD's head of media relations, Nicholas Bray, informed Tax Analysts on 1 March that an anonymous document was circulated during the first day of a two-day Paris meeting of the OECD-Commonwealth joint working group on harmful tax competition. According to Bray, the document, which purports to be the minutes of an earlier meeting of the OECD Committee on Fiscal Affairs (CFA), casts the OECD's negotiating efforts in a bad light; however, the document is not authentic, Bray assured Tax Analysts.

     Commonwealth Secretary General Don McKinnon issued a statement expressing concern that the document may indicate that the CFA is not fully negotiating in good faith. McKinnon restated the Commonwealth's position on the harmful tax competition debate and on the joint working group's efforts. His statement, released 28 February, is as follows:     

         I have seen what I believe is a minute of a meeting of the Fiscal Affairs Committee (FAC) of the OECD on the ongoing dialogue between that organisation and the Commonwealth.

         If this is a true and accurate record, I am extremely disappointed. The non-OECD countries have been holding discussions in good faith with the OECD on what the OECD calls "harmful tax competition."

         This minute clearly confirms the suspicion of many that the FAC not only writes the rules, but wishes to be the prosecutor, judge, jury and jailor. They are setting themselves up as the world's financial policeman.

         In two meetings involving the OECD and Commonwealth non-OECD members -- in Barbados in early January and London in late January -- the discussions had been frank and constructive. The outcomes of these discussions are important to the Commonwealth developing countries which the OECD has threatened to list as "unco-operative tax havens". For these countries, the fabric of their economies and their societies is at stake, which is why so much time and effort has been put into these talks to enable the OECD to understand their concerns. But it now appears that the OECD may have a different agenda.

         I can assure the OECD that the Commonwealth will not be "reined in" on this issue.

         Our members are all committed to adhering to the highest standards of fiscal probity. This was made clear at the 2000 Commonwealth Finance Ministers Meeting which requested regional and multilateral dialogue on the implications of the OECD proposals and mandated the Commonwealth Secretariat to facilitate this process.

         Several of our member countries' offshore financial centres (OFCs) were set up at the urging of OECD member countries and now they are being criticised. These OFCs would readily accept assistance or advice, where necessary, to help regularise practices which might be seen to be inappropriate.

         I am also concerned at attempts to denigrate Prime Minister Owen Arthur of Barbados. Prime Minister Arthur, the current Chairman of the Caribbean Community (CARICOM), co-chairs the Joint Working Group set up at Barbados and has invested, along with others, considerable effort to find consensus and has offered positive political concessions. This process was endorsed by Commonwealth finance ministers, so Prime Minister Arthur can indeed speak for the Commonwealth in this area.

         This minute suggests that the FAC is determined to obstruct genuine political dialogue. It clearly has the potential to derail the negotiations which lie ahead.

         My hope is that when the talks begin in Paris on Friday a more constructive position will be adopted.

Bray said that the OECD is concerned that the release of the document was not accidental, but a ploy by groups opposed to the harmful tax competition initiative to again criticize the OECD's views.

     On 1 March, OECD Secretary General Donald J. Johnston issued the following response to McKinnon's statement:

           I regret very much the statement you issued today, based on a document presented as "a minute of the Fiscal Affairs Committee of the OECD". We have just obtained from journalists a copy of the document on which you apparently base your comments, and I can assure you that this is not an OECD document.

         A simple prior verification with me or any of my staff would have made this very clear.

         To issue a public statement without having made any attempt to verify the accuracy of the source is most inappropriate. Whilst I regret this incident, I am convinced that the OECD members of the Joint Working Group are ready to carry out tomorrow's discussion in good faith. I do indeed hope that the discussions will prove to be positive.

         I must say, however, that the issuance of your statement the day before the meeting has not increased the chances of a successful outcome.

 Tax Analysts obtained the texts of the above statements from the OECD media relations office in Paris.


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