Tackling tax abuse
Though OECD work on making international tax fairer began over 50 years ago, it was not until 1998 and a report on harmful tax competition that the OECD stepped up its work against tax evasion, tax havens and abuse.
Since then it has been committed to counter harmful tax practices and improve compliance, encourage exchange of information, combat aggressive tax planning and corruption, and improve co-operation between tax and anti-money laundering authorities.
The 1998 report defined a tax haven as a country or territory where there is no or nominal tax on the relevant income, combined with a lack of effective exchange of information, a lack of transparency, and no substantial economic activities. The OECD has also developed standards of transparency and exchange of information that have been endorsed by governments and international organisations throughout the world and which serve as a model for most of the 3,000 bilateral tax conventions in existence today.
The standards require several things, such as exchange of information on request where it is "foreseeably relevant" to the administration and enforcement of the domestic laws of the treaty partner, and respect for taxpayers' rights. Strict confidentiality of all information exchanged is also required. Progress on improving transparency, informationsharing and compliance with tax laws accelerated in the lead-up and aftermath of the G20 summit in April 2009, which set the fight against tax havens as a priority.
All 30 OECD countries now meet the standard. Of the 40-plus tax havens that the OECD identified in 2000, nine-the Netherlands Antilles, Aruba, Bermuda, the British Virgin Islands, Cyprus, the Isle of Man, Guernsey, Jersey and Malta-are actively implementing the OECD standard either by means of Tax Information Exchange Agreements (TIEAs) or tax treaties, and the international community needs to recognise this progress. Macao and Singapore, as well as Hong Kong, China, have endorsed the standards and will take steps before the end of 2009 to start implementing them. Andorra, Liechtenstein and Monaco have also agreed to implement the standards. The Global Forum on Taxation, which is now the pre-eminent platform for international dialogue on this issue, will monitor commitments and push for compliance in more jurisdictions, as well as work to prevent the creation of new tax havens.
OECD (1998), Harmful Tax Competition: An Emerging Global Issue, Paris For more details, see also www.oecd.org/tax/evasion
©OECD Observer No 273 June 2009
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