The OECD is attempting to eliminate ``harmful tax practices''. It
sounds good, until one realizes that they have a very odd definition
of ``harmful''.
Note also that Bermuda is first in line to kiss the OECD's ass. Time
to move some funds.
----- begin report -----
June 20, 2000
OECD Report on Tax Havens
The Organization for Economic Cooperation and Development (OECD)
has an ongoing project on harmful tax competition, a project which
encompasses either elimination of tax havens or eventual sanctions
against jursidictions considered to be tax havens.
On Monday, June 26th, the OECD is expected to release both a list
of tax havens and a report on its progress in identifying and
eliminating harmful tax practices.
The OECD announced that six jurisdictions have made an advance
commitment to the principles of the project to eliminate harmful
tax competition. The countries have committed to take steps to
eliminate any harmful aspects of the jursidiction's regimes that
relate to financial and other services.
Bermuda, Cayman Islands, Cyprus, Malta, Mauritius and San Marino
are the six jurisdictions that have made this commitment to
eliminate harmful tax practices by the end of 2005.
In similar letters to the OECD, the six jurisdictions commit to
(1) a programme of effective exchange of information in tax
matters, (2) transparency, and (3) the elimination of any aspects
of the regimes for financial and other services that attract
businesses with no substantial domestic activities.
Specifics of the commitments, and what anticipated changes in
domestic law or administrative practice might be required in each
jursidiction by 2005, are not yet available. We are in the process
of identifying what those changes might be and what the timeline
for such changes might be.
The U.S. Administration has long been an active supporter of the
OECD effort. In a press release, Treasury Secretary Larry Summers
yesterday urged all jurisdictions that have not previously made
commitments to eliminate harmful tax practices to do so. The
U.S. Administration has previously proposed legislative changes in
this area, such as a denial for foreign tax credits related to
investments in countries listed as tax havens, but to date has not
been successful in having these items considered by Congress.
OECD Report on Tax Havens
On June 19, 2000, the OECD announced that six jurisdictions had made
advance commitments to eliminate harmful tax practices by the end of
2005, embracing international tax standards for transparency, exchange
of information and fair tax competition. The "advance commitment"
jurisdictions are: Bermuda, Cayman Islands, Cyprus, Malta, Mauritius,
San Marino. On the same date, U.S. Treasury Secretary Lawrence
Summers issued a statement welcoming the commitments "to help ensure
that their financial sectors will meet international standards of
fairness, transparency and disclosure, including the exchange of
information in the context of criminal and civil tax matters."
It has been reported that the advance commitment made by Bermuda and
the other jurisdictions were made under the threat of being officially
listed as tax havens by the OECD. On June 26, 2000, the OECD
Committee on Fiscal Affairs is scheduled to report on the status of
its work in identifying and eliminating harmful tax practices. This
"Report on Progress in Identifying and Eliminating Harmful Tax
Practices" is expected to include a list of jurisdictions that are tax
havens under the criteria of a 1998 Report, "Harmful Tax Competition:
An Emerging Global Issue", and to include the results of the
Committee's review of OECD member country preferential regimes.
It should be noted that the advance commitment letters from Bermuda
and the other five jurisdictions are effectively identical in their
wording, except that the Bermuda and San Marino letters indicate that
details of these steps and a specific timetable have been agreed with
the OECD. (The other letters indicate that these details remain to be
negotiated.) The Bermuda letter makes a commitment under the
"principles of the [ 1998 OECD report] ... to implement such measures
(including through any legislative changes) as are necessary to
eliminate any harmful aspects of Bermuda's regimes that relate to
financial and other services (as provided in more detail in the Annex
to this letter)." [Note: the Bermuda letter is unique in referring to
an Annex to the letter of commitment. This Annex has not been
released by the OECD.]
Specifically, the Bermuda letter states a commitment to a "programme
of effective exchange of information in tax matters, transparency,
[and] the elimination of any aspects of the regimes for financial and
other services that attract business with no substantial domestic
activities." [Emphasis added.] The Bermuda letter notes that the OECD
is prepared to assist Bermuda as necessary to implement the
principles. The letter proceeds to make further commitments to
refrain from introducing any new regime that would constitute a
harmful tax practice, modifying any existing regime so that it would
constitute a harmful tax practice under the OECD report, and
strengthening or extending the scope of any existing measure that
currently constitutes a harmful tax practice under the OECD report.
After the release of the OECD progress report on June 26th, the next
step in the OECD's focus on "harmful tax competition" will come on
June 29, 2000, when French Minister of Finance Fabius will launch a
global dialogue on harmful tax practices. According to the OECD, "this
high level Symposium will bring together the 29 Member countries and
30 other countries to discuss how to develop a global response to the
challenges of harmful tax practices."
>From the perspective of the U.S., the Treasury Department has long
been an active supporter of the OECD effort. The U.S. Administration
has previously proposed legislative changes in this area, such as a
denial for foreign tax credits related to investments in countries
listed as tax havens, but to date has not been successful in having
these items considered by Congress. While Congress has not considered
the Administration's tax proposals regarding tax havens, it does
support the Administration's efforts to negotiate information exchange
agreements which would serve to curtail money laundering.
Attachments:
Bermuda advance letter of commitment: (See attached file: bermuda1.jpg)
begin 664 bermuda1.jpg
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`
end
