Report attacks big financial centres
OECD 'blind' to members faults
Offshore financial centres - popularly viewed as tax havens - have better regulatory standards than some financial centers in industrialized countries, according to a report published today by the Commonwealth Secretariat.
The standards of industrialized countries are no better, and sometimes worse, than offshore centers on matters such as a willingness to exchange tax information or the identification of individuals behind companies or trusts, says the study. It was commissioned on behalf of the International Trade and Investment Organization, a group of small countries with international finance centres.
Malcolm Couch, an Isle of Man tax official and ITIO deputy chairman, said small countries had been unfairly stigmatized by more powerful countries. "It's time to stop treating small countries with finance centres as different. Big countries have no moral or legal edge over small ones," he said.
Offshore financial centres such as the Cayman Islands and the Bahamas have improved their regulatory standards as a result of the Organisation for Economic Co-Operation and Development's harmful tax competition initiative, launched in 1996.
In 2000, it published a 'blacklist' of 35 tax-haven countries, which prompted offshore centres to make commitments to remove harmful tax practices, improve transparency and exchange information.
This process has given way to "considerable rap-prochement" between OECD and non-OECD participants, according to the report. Both sides have recognized the case for creating "a level playing field", although non-OECD countries still have concerns about distortions caused by the tax treaty network and the OCED's "blindness" about its members.
For example, many US states, including Delaware and Nevada, do not require companies to provide beneficial ownership information. Many countries permit the use of bearer shares, which reduce transparency. Switzerland limits the exchange of tax information to cases of fraud, while Hong Kong and Singapore limit information exchange to cases where they have a domestic interest.
Mr Couch said small countries should be involved in the creation of new international standards, rather than have these imposed on them by multilateral bodies controlled by large countries.
The report called on big countries to open up access to the international network of double taxation treaties to small countries. It criticised the OECD for offering small countries "tax information exchange agreements" with-out mutual benefits.