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Inland Revenue

Tax Policy

PUBLISHED 12 July 2001

OECD tax haven work

New Zealand this week hosted a meeting between the OECD and Pacific Forum jurisdictions to discuss the OECD's harmful tax practices project and its implications for them. We publish here a background report on the OECD project and the statement by the New Zealand delegation summarising the Auckland meeting. See Update on OECD tax haven work.

Update on OECD tax haven work

The past year has seen a great deal of international discussion on tax havens that has drawn attention to the Pacific area. OECD meetings have been held in Paris, followed by a meeting this week in Auckland between the OECD and Pacific Forum jurisdictions.

Robin Oliver, General Manager of the Policy Advice Division, has returned this week from OECD meetings in Paris, including the OECD's Committee on Fiscal Affairs. This is the committee that directs all OECD's tax policy and administration work. Robin Oliver has recently been elected to the committee's Advisory Board.

A key item on the agenda of the Paris meetings was the OECD's harmful tax practices project. Two OECD reports have been released so far on this - in 1998 and 2000. As those reports outline, the objective of the project is to establish standards for how countries should work together in a world where tax systems of different countries are increasingly inter-linked.

The focus to date of OECD work has been on appropriate tax practices that OECD countries should adopt and the difficulties tax havens can create in the international tax area. The 2000 report identified a number of tax havens and sought their co-operation. The identified havens included: Cook Islands, Nauru, Niue, Samoa, Tonga, and Vanuatu.

The OECD report sought tax haven co-operation by way of their agreement to commit to:

  • exchange tax-related information with the tax authorities of other countries;
  • make their tax laws transparent;
  • remove tax regimes seen as being targeted at undermining the tax systems of other countries.

In accordance with the 2000 report, on July 30 this year a report was to be released by the OECD identifying those tax havens that had not agreed to co-operate with OECD countries.

Since the release of the 2000 Report, there has been considerable international interest in this issue. The Commonwealth Secretariat and the named tax havens have queried aspects of the project. The new United States' Administration of President Bush has also raised concerns.

These issues were discussed at the OECD meetings last month. The OECD has yet to release the report resulting from these discussions. However, the leaders of the G7 countries (Canada, France, Germany, Italy, Japan, UK, and USA) issued a statement last week supporting modifications to the project that were discussed at the OECD's Committee on Fiscal Affairs meeting.

The modifications include:

  • an extension of the deadlines for making commitments under the project to 30 November 2001;
  • limiting commitments sought to 'transparency' and 'effective exchange of information';
  • the application of a potential framework of co-ordinated defensive measures (anti-tax avoidance measures) to apply to jurisdictions outside the OECD no earlier than it would apply to OECD member countries. This would be no earlier than 2003.

To follow up on these developments, New Zealand this week hosted a meeting between the OECD and a number of Pacific Island jurisdictions to discuss the project and its implications for those jurisdictions. At the end of the meeting it was agreed that the New Zealand delegation, as hosts, would release the following statement summarising the meeting. For further information contact Robin Oliver at 021 633-748.

Statement by New Zealand following OECD/Pacific Island Countries Meeting in Auckland, 9-11 July 2001

The OECD and a number of Pacific Islands jurisdictions held a series of meetings over three days in Auckland, New Zealand in connection with the OECD's project on harmful tax practices. The meetings were attended by the Prime Minister of the Cook Islands, the Hon Dr Terepai Maoare, the Deputy Premier of Niue, the Finance Minister of Vanuatu and by high level officials of Nauru, Samoa, Tonga, Australia, New Zealand and the OECD and PIF Secretariats.

These meetings were the third in a series of meetings held between the OECD and the Pacific Islands jurisdictions with a view to furthering constructive dialogue on the OECD's harmful tax practices work. The Pacific Islands jurisdictions welcomed the recent modifications made to the OECD's project, although generally felt that these did not go far enough to meet all of their concerns. They looked forward to the publication of the OECD 2001 Progress Report, which would confirm those modifications. The OECD confirmed that the project is not seeking to prevent small jurisdictions from competing in the export provision of financial services. Pacific Island jurisdictions welcomed the OECD's acknowledgment of their need for technical assistance, and expressed the urgency of this need.

While it was recognised that more work was required, all parties agreed that the series of meetings have improved mutual understanding. It is expected that further discussions will be held over the course of the next four months.