Editorial
A United Stand Against theOECD
Low tax jurisdictions, commonly referredto as tax havens, continue to do battle with rich industrialisednations represented by the Organisation for Ecomonic Co-operationand Development (OECD), in their quest to eliminate "harmfultax practices."
Through the OECD, they argue that these jurisdictions pursue policiesthat thwart international tax cheats and which do not offer alevel playing field in the global financial market.
Offshore financial centres, many of them in small states - andmany of them in the Caribbean including the Cayman Islands-- havefound themselves under siege from the OECD, which has been seenas high- handed and dictatorial in its demand for tax havens tocomply with its definition of fair tax policies.
At issue is the secrecy that surrounds financial transactionsin these low-tax jurisdictions. It is a bugbear to the OECD, fuellingits strident demands for transparency.
Last year, the OECD's approach drew the righteous indignationof tax havens, when it blacklisted some 35 of them and demandedcompliance or else face
punitive action.
Low tax juridictions argue that the OECD's approach threatenstheir sovereignty and the right to set their own laws and is tantamountto discrimination against small countries which have built theireconomies on funds coming from people taking advantage of lowor no tax centres. Further to that injury, was the insult of lackof consultation by the OECD.
The Cayman Islands has been in the midst of the firestorm withthe OECD and its negotiating teams have not only had their forayswith that body, but have also had the pressure of taking actionon the domestic front, to signal its cooperation.
Local attorney, Michael Alberga (in a presentation at the recentMiami Conference on the Caribbean and Latin America) has arguedthat the OECD's initiative on harmful tax competition, is, inthe main, a ploy to "prohibit capital flow from high taxnations to low or no tax countries, abrogate the rule of law,disregard the rule of national sovereignty and put in place proceduresto remove the right to privacy...with threats to use their economicmight to bring to heel all of those who do not agree."
It's a view that has found resonance with many of the defendersof the position of low tax jurisdictions, even in member countriesof the OECD. Indeed, in the United States, a pressure group, theCenter for Freedom and Prosperity/Coalition for Tax Competitionhas been formed to lobby for mainitaining competitive internationalmarkets, and against the OECD's policies.
This week, the battle ground is Barbados, a meeting of "taxhavens" and OECD representatives, at which the Cayman Islandsis ably represented by Financial Secretary - the Hon. George McCarthy.With continued dialogue, it is becoming clear that discussion,negotiation and accommodation must replace the OECD's dictatorialstance.
Countries like Cayman, which have built successful economies onmonies coming from people looking for low tax centres, must fightwith everything they have, to preserve their livelihood.
In this light, Cayman Islands may well strengthen its bargainingposition by employing international consultants skilled in negotiationand by holding its ground with others countries in a similar position.
For in this fight, size need not be an inhibiting factor. It isknown that this little mouse has been known to roar.