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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
PROMOTING INTERNTIONAL PROMOTING INTERNTIONAL TAX CO-OPERATIONTAX CO-OPERATION Cercle d’Economia d’Andorra
2 June 2003Presentation by:
Jeffrey Owens and Donal GodfreyOECD’s Centre on Tax Policy and Administration
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Overview
What is OECD?
Why it is interested in Harmful Tax Practices
What are these practices?
What has the OECD response been?
Implications for Andorra
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Limited membership but a global reach Intra governmental Wide range of issues
The OECD:
United StatesCanadaMexico
Iceland
AustraliaNew Zealand
Austria Greece PolandBelgium Hungary PortugalCzech Rep Ireland Slovak RepDenmark Italy SpainFinland Luxembourg SwedenFrance Netherlands SwitzerlandGermany Norway Turkey United Kingdom
JapanKorea
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
The OECD’s Work
Various committees covering almost all aspects of governmental action (except defense and culture)
Policy formulationProduces:
– statistics– reports– recommendations– few “hard” rules (Bribery Convention)– many “soft” rules (Model Tax Convention)
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Committee on Fiscal Affairs(CFA)
Main Tax Policy Body of the OECD
Mandate covers:
– International and Domestic Issues
– Direct and Indirect taxes
– Tax Policy and Tax Administration
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
OECD’s Work in Taxation
OECD develops guidelines in areas where international co-ordination is desirable to foster free trade and effective tax administration:– tax treaties (OECD Model Tax Convention)– transfer pricing– e-commerce– exchange of information– harmful tax practices
Guidelines developed through expert committees and consensus approach
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Current Approach
Globalisation has required a refocus of OECD’s tax work:– global solutions to tax problems
– expansion of dialogue to include:
• Non-OECD economies
• business community
– expanded work programme
• includes harmful tax practices
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Some Effects of Globalisation
Reduction of barriers to trade and
investment
Advances in communications technology
New knowledge-based economy
Trade is getting lighter
Increased competition between governments
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Implications for national tax systems
The benefits– Reducing tax rates and broadening the tax base– Governments search for new efficiencies/better
service– A re-assessment of fiscal climate for investment
The challenges – Global Business and National Tax Systems must
co-exist– Difficulties in taxing income from financial activities – New opportunities for international tax evasion
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Tax Competition not always harmful
Increased Competition – an inevitable effect
of globalization
– At issue is the distinction between fair competition and harmful tax practices
– e.g. no direct taxes is a legitimate policy choice but is bank secrecy ?
– Harmonisation of taxes is out - it’s a completely different issue
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Fair Versus Harmful Competition
Competition can be fierce and fair
The high road– Compete on overall levels of tax, balance of
taxes, general structures of tax rates– Preferential Regimes that are non-discriminatory
and transparent
The low road– Compete with measures that lack transparency
and secrecy provisions
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
OECD Objectives
What does the OECD seek ?– Sufficient transparency for tax audits
accounting, ownership and bank information should be available
– Effective Exchange of Information
A New Era in Co-operation?
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
1998 Report– created Forum on Harmful Tax Practices– established criteria for HTP
3 aspects– OECD member country regimes– tax havens– other countries
2000 Report on Access to Bank Information– Ideally all OECD Member countries should permit
tax authorities to have access to bank information for all tax purposes
The OECD Response
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
32 offshore jurisdictions committed to trans-parency and effective exchange of information
Aruba Cyprus Neth. Antilles US Virgin IsAntigua Dominica Niue VanuatuAnguilla Guernsey PanamaBahamas Grenada SamoaBahrain Gibraltar San MarinoBelize Isle of Man SeychellesBermuda Jersey St. Kitts & NevisBritish V.I Malta St. Vincent Cayman Is Mauritius St. Lucia Cooks Islands Montserrat Turks & Caicos
State of Play: Tax Haven Work
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Only 6 offshore jurisdictions now listed as un-cooperative tax havens
Andorra Marshall Islands
Liechtenstein Nauru
Liberia
Monaco
State of Play : Tax Haven Work
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
State of Play: Tax Haven work
Jurisdictions have engaged constructively with OECD
32 jurisdictions are our participating partners in further developing standards.– Model Agreement on Effective Exchange of
Information– Accounts Requirement
Change since 1998 has been remarkable
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
47 OECD preferential regimes identified as potentially harmful
July 2003 to abolish or modify – Many have already done so
Identification of Harmful Preferential regimes in OECD
State of Play : Member country work
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
September 2001 Global Forum Meeting
Bilateral meetings with China, Macao, Hong Kong, Singapore, Malaysia, Uruguay, Chile, Argentina, Brazil
OECD will focus efforts during next 12 months on the major financial services centres
Association of non-OECD countries
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Improving Access to Bank Information
The 2000 Report set out a series of measures to improve access to bank information.
Considerable progress has been made.
– Abolition of anonymous accounts Yes
– Abolition of Domestic Tax Interest Yes
– Improved access for criminal tax purposes Yes
– Improved access for civil tax purposes Con’t
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
EU Savings Directive
EUSD: – Has not helped OECD efforts to promote global
standards of tax co-operation– Has raised level playing field issues
BUT assuming its agreed:– Interim solution only, ultimate objective is
exchange of information– Will not prevent OECD pursuing its agenda for
exchange on request in context of HTP project
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Increased International Cooperation– Offshore and onshore financial centers are
engaging in effective exchange of information.– Harmful Tax Practices eliminated from OECD area.– Non-member countries fully engaged.
Dividing world between co-operative and uncooperative jurisdictions
Fair/Transparent competition becomes the norm.
The end Game : 2005
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C E N T R E F O R T A X P O L I C Y A N D A D M I N I S T R A T I O N
Implications for Andorra
Traditional European Offshore Model is evolving
Pressure to improve transparency and exchange of information for tax purposes will increase
Going forward, to be successful, OFCs will not able to rely on secrecy
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