The Organisation for Economic Co-operation and Development has held out an olive branch to 35 tax havens by offering to remove the threat of economic sanctions if they sign a collective agreement to transparency and co-operation.
The OECD’s move, according to the Financial Times, is in response to accusations made by the tax havens that it was harassing them into accepting standards that the organisation’s own members were not adhering to.
The names of the 35 tax havens were included on an OECD blacklist, as part of its international campaign to crackdown on tax evasion. These countries were threatened with having favourable tax treaties scrapped if they did not co-operate by July 2001.
The OECD had originally intended to hold bilateral talks with the tax havens, but this was scrapped after complaints that the July date was too soon.
The tax havens have complained that the OECD did not explain clearly the changes they were expected to make. The most contentious issue is the demand that OECD revenue authorities have access to all tax information. The havens are willing to co-operate in criminal cases, but refuse to disclose information in civil cases.
The OECD has since softened its approach, a move which has pleased the Commonwealth which counts two-thirds of its members among the tax havens.
Meanwhile the British Virgin Islands has welcomed a KPMG report on financial regulation in the Caribbean Overseas Territories and Bermuda. The British Virgin Islands has already begun implementing a anti-money laundering code of practice and Compulsory Powers Bill to comply with the report’s recommendations.
Across the Atlantic, the US Treasury Department and the Internal Revenue Service have issued a notice to shut down an abusive Guam tax shelter currently being marketed. The tax shelter was set up to protect account holders from both Guam and US taxation.
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