OECD Triumphant
Friday, January 15, 2010

The OECD is going to hold a triumphant media briefing next Tuesday to celebrate the fact that it has obtained 100% commitment from 'tax havens' and other types of jurisdiction to its standards on tax transparency and effective exchange of information.

Jeffrey Owens, Head of the OECD’s Tax Centre and Pascal Saint-Amans, Head of the Global Forum Secretariat, will brief journalists on the increase in the number of agreements signed and their quality and relevance, the impact on tax compliance around the world, and the next steps, including the timing and outcomes of peer reviews and the role of developing countries in the 'fight against tax havens'.

Since the April 2009 G20 London Summit, almost 300 tax agreements have been signed to meet OECD standards; all OECD and G20 countries were already committed to these standards. Of the more than 40 offshore financial centres identified as 'tax havens' in 2000 all but six now have one or more agreements which meet the standards, and even these six are making progress towards the OECD's desired outcome.

The OECD lists 63 jurisdictions that have 'substantially implemented the internationally agreed tax standard'. 23 jurisdictions have committed to the internationally agreed tax standard, but have not yet substantially implemented it, as follows: Andorra, Anguilla, Bahamas, Belize, Cook Islands, Dominica, Grenada, Liberia, Marshall Islands, Montserrat, Nauru, Niue, Panama, St Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Vanuatu (all labeled 'tax havens'), Brunei, Costa Rica, Guatemala, Malaysia, Philippines and Uruguay (not so labeled).

The internationally agreed tax standard, which was developed by the OECD in co-operation with non-OECD countries and which was endorsed by G20 Finance Ministers at their Berlin Meeting in 2004 and by the UN Committee of Experts on International Cooperation in Tax Matters at its October 2008 Meeting, requires exchange of information on request in all tax matters for the administration and enforcement of domestic tax law without regard to a domestic tax interest requirement or bank secrecy for tax purposes. It also provides for extensive safeguards to protect the confidentiality of the information exchanged.

As the OECD remarks, attention now turns to implementation of the TIEAs and comparable treaty wordings which make it possible for just about any tax authority in the world to ask another country for information about persons whom it supposes with reasonable grounds to be in breach of tax law. There is hardly any data as to what is actually going on from that perspective, and the OECD no doubt wonders if all those jurisdictions which have so readily rolled over will in practice be quite so complaisant when push comes to shove and they are actually asked about real individuals or companies. And of course, the requesting tax authority not only has to have some basis for its request, but also has to find the individual concerned in a specific jurisdiction before it can make a request. Fishing expeditions are not allowed!

Still, on a day when the UK's HMRC revealed that it had conducted more than 5,000 covert surveillance operations on telephone calls and e-mails last year alone under the Regulation of Investigatory Powers Act 2000, you had better believe that tax authorities are going to use every weapon at their disposal. Needless to say, there are no weapons that can be used by taxpayers to fight back against the secretive, intrusive powers that are being accumulated by the taxman. In any case, you don't know about it until it's too late, and there comes the knock on the door. Scary!