OECD Releases List of Uncooperative Havens, a Model TIEA, and Threatens to Deal with Abstainers

On April 18, 2002, the Organization of Economic Cooperation and Development released a package of information on the status of its harmful tax practices, including a model tax information exchange agreement (TIEA). Meanwhile, the OECD conceded that it would soon have to deal with Switzerland and Luxembourg, the two OECD members permanently abstaining from the harmful tax practices initiative. According to Gabril Makhlouf, the Chair of the OECD’s Committee on Fiscal Affairs, the real success of the project so far is that the OECD has received commitments from 31 jurisdictions to the OECD’s principles of transparency and effective exchange of information. Makhlouf said the success of the initiative’s cooperation can already be seen in the models for exchange of information developed jointly by a number of the jurisdictions and the OECD. Makhlouf recognizes and understands the concerns about establishing a level playing field. Financial services are extremely mobile and it is in no one’s interest that harmful activities move to jurisdictions that do not meet acceptable standards of transparency and effective exchange of information. The OECD has made considerable progress towards achieving a level playing field as a result of having a very large number of on and offshore financial centers committed to the same principles. Its aim is that the framework of coordinated defensive measures applying to uncooperative finance centers prevents them from gaining an economic advantage. Such a framework would not be implemented before April 2003.