Group tightens net round tax havens
Sheel Kohli in London
Industrial countries have stepped up their campaign against tax havens, publishing their third tax haven hit list in a month and this time adding the threat of sanctions for those refusing to clean up their act.
The 29-member Organisation for Economic Co-operation and Development (OECD) yesterday published a list of 35 territories, including British, French and US-linked territories such as Gibraltar, Monaco, and the Virgin Islands, which it said were guilty of practising harmful tax practices.
Among the Asian centres singled out were Niue, and the Cook Islands - which have allied themselves to New Zealand - the Maldives, Nauru, Samoa and Tonga.
For small principalities such as Liechtenstein, the move was a double blow as was named in a previous OECD report for not stamping out money laundering.
The four-year study is the result of an in-depth analysis by the OECD into the complex legislation and practices of tax havens worldwide.
Many locations, such as Bermuda - which was also named - are often used by companies to gain important tax advantages.
In Hong Kong, many companies quoted on the SAR's stock exchange sought registration in Bermuda, particularly before the handover, although the number is dropping.
Yesterday, the OECD said it was giving the tax havens one year to reform.
'They are being given the opportunity over the next 12 months to determine whether or not they wish to work with the OECD to eliminate harmful features of their regime,' it said.
Following that period, a series of 'defensive' measures could be taken against those havens that do not comply with international standards.
The OECD was due to name 47 locations classified tax havens, but several, including Bermuda, the Cayman Islands, Cyprus, Malta, Mauritius and San Marino, said they would meet international standards by 2005.
It said it classified tax havens as locations with nominal or no tax whatsoever, and which openly or implicitly promote themselves as locations with lax disclosure rules.
The report is the OECD's first response since ministers representing members voted in 1998 to study the effects of harmful tax competition.
'The project is about ensuring the burden of taxation is fairly shared and that tax should not be a dominant factor in making capital allocation decisions,' the OECD said.
'The project is focused on the concerns of OECD and non-OECD countries, which both experience significant revenue losses as a result of harmful tax competition. Tax base erosion as a result of harmful tax practices can be a serious threat to the economies of developing countries,' it added.
It intends to help the named countries determine whether their potentially harmful tax practices are damaging.
Of the 35 countries named, the OECD believes most will enter a constructive dialogue and the OECD is developing a framework in which member countries can adopt a common approach to tackling tax competition.