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Excerpts from BNA and WTD news articles on the Global Tax Forum:
- Bureau of National Affairs Excerpt
- Worldwide Tax Daily Excerpt
[Excerpts from The Bureau of National Affairs, October 16, 2003]
OTTAWA--Most international tax authorities reconfirmed their commitments to improve the transparency of their taxation systems and increase information exchanges with other jurisdictions, a
commitment that brings them "much, much closer" to an international agreement to deal with tax havens, Gabriel Makhlouf, chair of the Organization for Economic Cooperation and Development's Committee on
Fiscal Affairs, said Oct. 15.
Representatives of two Caribbean jurisdictions announced their intention to temporarily suspend previous commitments, Makhlouf, a co-chair of the Oct. 14-15 meeting of the OECD's Global
Forum on Taxation, told a news conference. The remainder of the 40 governments involved in an remain committed to work intensively toward achieving the level playing field among all tax jurisdictions that is needed
to finalize a global agreement, he noted. . .
. . . Makhlouf confirmed that Antigua and Barbuda was one of the jurisdictions that "took a more cautious approach" and withdrew its commitments, but its representatives indicated
they would continue to work with OECD and non-OECD countries on negotiating improved tax information exchange commitments.
Makhlouf would not name the other jurisdiction, but Daniel Mitchell, a tax policy expert with the Washington, D.C.-based Heritage Foundation, told BNA Oct. 15 that the other country was St.
Vincent. . .
. . . The Ottawa meeting was highly successful for smaller, non-OECD jurisdictions by proving that they are able to participate and have their concerns addressed, Terepai Maoate, deputy
prime minister of the Cook Islands and also a co-chair of the meeting, said at the news conference.
"The most impressive outcome is the ability of this meeting to accept the wishes of many non-OECD members to make a proposal that both sides work together into the future," Maoate
said. "I'm very grateful, from our point of view, that small jurisdictions have been given the opportunity to work together as a group under the Global Forum ... I feel strongly that I'm part of this
decisionmaking body. That's something I really appreciate."
Once those jurisdictions that are not currently part of the process, including nonparticipating OECD members, realize that the door is open for them to participate and to have their
concerns considered, all countries eventually will be involved in the process of developing a level playing field, Maoate said. "They will be attracted to come in because it is there that they can voice
whatever their concerns are," he said. "We feel very strongly this is an achievement." . . .
. . . Outside observers took a less positive view of the Ottawa meeting's outcome, suggesting that the OECD's admission that a level playing field does not currently exist among the world's
tax authorities represents, at least for the time being, the end of the OECD's initiative to eliminate tax havens. "The level playing field does not exist. That's a huge admission for the OECD," said
Heritage Foundation spokesman Mitchell.
The approach taken by the low-tax jurisdictions means there can be no movement on an international agreement until the European Union's cross-border savings taxation agreement is extended
to all EU members, Mitchell told BNA. "It's dead until the other jurisdictions all agree on these attacks on financial privacy that the OECD wants, and that will never happen," he said.
Switzerland will never agree to undermine the privacy of its financial system, which would ultimately require a constitutional amendment, and the United States is also unlikely to accede to
the privacy-invasive proposals the OECD is trying to impose, he said. "They can wrap it up, but it's still pig manure," he said.
The commitment of most jurisdictions at the Ottawa meeting to further discussions is meaningless, as the low-tax jurisdictions are merely playing along with the initiative because they
believe it will never actually be implemented, Mitchell said. At the same time, being able to announce that those countries have recommitted to the process permits the OECD to save face, he said. "They're
trying to lose gracefully, and the low-tax jurisdictions don't want to prod a sleeping bear," he said.
'Major Defeat'
The Washington-based Center for Freedom and Prosperity Oct. 15 characterized the Ottawa meeting as a "major defeat" for the Global Forum process and the OECD's efforts to end tax
competition among the world's jurisdictions. The OECD has been forced to concede that many of its own member nations are tax havens, and that jurisdictions on the OECD's blacklist have no obligation to end their
market-based tax laws unless all countries agree to the same policies, Andrew Quinlan, the center's president, said in a statement.
"The OECD's tax harmonization effort has hit a brick wall, and this is good news for the global economy. If high-tax nations are worried that jobs and capital are fleeing to low-tax
jurisdictions, they should fix their bad tax laws rather than trying to create a global tax cartel," he said.
A closing statement issued Oct. 15 by the Ottawa meeting's co-chairs confirmed that the meeting's participants agreed that a level playing field is fundamental to achieving fairness among
tax jurisdictions. "Participants acknowledged that progress had been made, but recognized that a global level playing field does not yet exist and that further progress could and should be made to achieve
it," the statement said.
"In particular, they agreed that ways should be explored to involve significant financial centers that are not currently participating in the Global Forum process. An important part of
the process would be to review what standards financial centers currently apply and where progress might be required," it said.
The statement noted that a small group of countries will be established to develop proposals for achieving a global level playing field and a process for how that could be achieved, with
the goal of reporting back to the Global Forum in April 2004. The group's first meeting is to be hosted by the Commonwealth Secretariat, it said.
[Source: October 16, 2003, The Bureau of National Affairs, By Peter Menyasz, Outcome of OECD Meeting Disputed; Two Jurisdictions Drop Commitments ]
[Excerpts from Worldwide Tax Daily, October 15, 2003]
The OECD's harmful tax competition initiative appeared to falter on 15 October after Antigua and Barbuda and one other low-tax jurisdiction suspended their commitment to work with the
multinational organization and other members decided to form a subgroup to study the fundamental concept of a level playing field until April 2004.
The European Union's recent savings tax directive compromise with several OECD members undercut the key premise that a level playing field could exist between OECD countries and
the 41 targeted tax havens, financial center leaders said on the sidelines of an OECD meeting in Ottawa on 15 October. As a result, Ronald Sanders, senior ambassador for Antigua and
Barbuda, indefinitely suspended his country's commitment to work with the OECD during the talks. Another jurisdiction, whose identity was not known by press time, also suspended
its commitment, according to the OECD.
"I informed them in the meeting today," Sanders told Tax Analysts in an interview. "I think
they were a little shocked. . . . Antigua didn't choose to do this; we were pushed to do it."
Sanders reasoned that he didn't actually suspend the commitment; the European Union's council of ministers suspended it for him. "[W]hen they made their decision . . . to have
special arrangements made for three of their member countries and five others on the EU tax savings directive [to apply a withholding tax in lieu of information exchange], they made the
playing field . . . even more unlevel than it was," Sanders said. (For related coverage, see Tax Notes Int'l, 9 June 2003, p. 971, or 2003 WTD 108-1 , or Doc 2003-13683 (3 original pages).)
"And since our commitment was predicated on a level playing field, that level playing field not only became rougher than it was, but it became unsustainable."
Commitment letters from Antigua and Barbuda, and most of the other low-tax jurisdictions, contained a concession that would allow them to bail out of the agreement if all OECD
member countries didn't comply with the standards themselves by 31 December 2005.
"That OECD initiative coupled with the European savings tax directive, the two of them are big enough to destroy countries," said McKeeva Bush, the leader of government business
and minister of tourism, the environment, development, and commerce for the Cayman Islands. "I don't think they came here with a plan; they came here to listen to us again," Bush
said. "We all feel . . . that we have . . . well regulated, documented regulations and the [OECD] countries are asking us for more and more. We are more regulated than [they are]."
Despite the setbacks, the Cayman Islands and many of the other low-tax jurisdictions that previously signed commitment letters to work toward effective information exchange are still
willing to cooperate, Bush said. "[Y]et there are those countries -- Singapore, Switzerland, Hong Kong, Luxembourg, Liechtenstein -- [that] are not prepared to do the same. And the
OECD is putting no pressure on them." . . .
. . . "What the OECD's position is as follows: There was no level playing field, there is no
level playing field, and we want a level playing field," Bray said. The plan is to set up a new working body composed of select OECD member countries and a few low-tax jurisdiction
members of the OECD's Global Forum to examine the issue of a level playing field by spring 2004, he said. "This is a proposal which is still being discussed, so they haven't finalized the
details. The proposal is they should get together to discuss what exactly is a level playing field, what is called for, how is it to be achieved. This is a positive move, so I couldn't regard
it as a disaster. We're all very well pleased with it."
Sanders, who will not participate in the new working body, disagreed. "Between now and the
spring of next year, nothing will happen, in any event," he said. "[E]verybody's commitment is suspended because no work is going to proceed on the OECD's agenda until this issue of
the level playing field is settled." . . .
. . . Nevertheless, "pretty much all of the jurisdictions are at least unofficially disavowing
their letters of commitment because the OECD unambiguously failed to live up to its side of the deal," said Daniel Mitchell, cochair of the Center for Freedom and Prosperity (CFP), a
U.S.-based organization that is lobbying against the OECD harmful tax competition project. "I suspect that that won't mean the collapse of the process, [however] . . . if I were an OECD
bureaucrat, what would I do? I would say let's continue talking because you don't want the whole thing to break down. You want to maintain the fiction that somehow you're going to make progress."
The CFP, as in years past, held its own event the day before the OECD meeting began to protest against the initiative. Representatives from 16 different low-tax jurisdictions attended,
according to CFP President Andrew Quinlan.
[Source: October 15, 2003, Worldwide Tax Daily, by Cordia Scott, Two Tax Havens Pull Out of OECD Forum; Project's Future Threatened]
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