Caribbean gets Commonwealth backing on tax havens blacklist By Anand Persaud
at the Commonwealth Heads of Government
Summit in Coolum, Australia
Stabroek News
March 2, 2002

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Caribbean countries battling blacklisting by developed countries because of their liberal tax regimes captured critical support on the eve of the Commonwealth Summit in Brisbane, Australia.

A meeting of the Ministerial Group on Small States came out yesterday resoundingly in favour of the Caribbean countries being able to set their own tax regimes without being pressured by the Organisation for Economic Cooperation and Development (OECD) which groups developed countries.

Four OECD countries - who are also influential members of the Commonwealth - the UK, Canada, Australia and New Zealand were said to have performed a pivotal role in the OECD softening of its stance on blacklisted "tax havens".

In 2000, the OECD blacklisted 35 countries because they were deemed to be tax havens. The criteria applied by the OECD were as follows: countries with no tax or nominal tax, countries with no effective tax information exchange system, countries that lack transparency in their tax system and countries with "inappropriate business conditions".

Among the countries ensnared in the OECD list were Anguilla, Antigua and Barbuda, the Bahamas, Barbados, Belize, the British Virgin Islands, Dominica, Grenada, Montserrat, the Netherlands Antilles, St Lucia, St Kitts-Nevis, St Vincent and the Grenadines, the Turks and Caicos and the US Virgin Islands. Two other Caribbean territories: Bermuda and the Cayman Islands gave "advance commitments" to avoid being put on the list.

Since the 2000 blacklisting, a number of countries have tried to reach an understanding with the OECD. These include Antigua and the Netherlands Antilles while Barbados has since been expunged from the list. The OECD had further threatened to "name and shame" defaulting countries if they had taken insufficient measures by February 28 this year. That date has since slipped by without action being taken and Deputy Secretary General of the Commonwealth, Barbadian Howard Cox - who was also at the meeting - averred at a press conference yesterday that the grouping of former British colonies had a carved out a significant role in this relaxation of the OECD outlook.

Speaking at the press conference on the deliberations of the Ministerial Group on Small States, Australian Foreign Minister Alexander Downer said that the meeting agreed that it was appropriate for the OECD to pursue transparent tax regimes and to target transnational money crimes. But he said it was also vital that small states not be "discriminated against by OECD countries" in respect of their tax systems.

Cox added that the OECD and Commonwealth small states - 32 of the 54 members - are at one on combating money laundering. "Nobody wants their financial systems to be used to launder the profits of transnational crimes or to be used as a means of financing terrorism. That was clearly agreed at the meeting today. Everyone wants to have transparent and robust financial systems, which adhere to standards and practices that ensure both transparency and robustness. But as Minister Downer said in his opening remarks, the transparency and robustness of the financial system does not depend on rates of taxation. There is a very clear commitment to the sovereignty of all states to set their tax policies and to fix rates of taxation that are consistent with their requirements for revenue and expenditure to achieve their developmental objectives."

He added that Commonwealth countries will work to ensure transparency in their tax systems, eliminate ambiguity and promote enforceability of requisite laws.

Downer prefaced his statement at the press briefing by saying that Australia - which chairs the small states group - has particular interest in this topic as 30% of its foreign assistance goes to Pacific countries, many of which fall into this category, and which states are in proximity to Australia. Several of these were also affected by the OECD blacklist.

Besides the blacklist, Downer said that the issue of climate change and the need to ensure that the international community is appropriately focused on this and related matters at the upcoming world summit on sustainable development was also addressed at the meeting. The key climate change issue is global warming and the likelihood of higher sea levels swamping low lying states in the Caribbean and the Pacific Ocean.

Questions were raised this week about Australia's commitment to the tenets of the Kyoto Protocol, which sets out targets for developed countries to cut emissions of gases that contribute to global warming. It followed Canberra's signing of a bilateral agreement with the US in Washington on Thursday on climate change, which critics say raise the prospect of Australia formally rejecting the Kyoto agreement and thereby endangering it. The US, which pulled out of the protocol because of the mandatory reductions set for the emission of greenhouse gases, has been actively wooing Australia and Japan to drop support for the protocol even as it unveiled its own voluntary alternative to the Kyoto Protocol.

Asked about this agreement possibly weakening and damaging Australia's stance on climate change, Downer declared that it had no bearing on the Kyoto protocol neither was it being presented as an alternative. "The signing of the bilateral agreement with the United States is an agreement for Australia and the United States to work together on the science of dealing with the climate change issue. Quite the contrary to the suggestions of some people that this is an attempt to torpedo the Kyoto protocol, this is actually an attempt to work with a country - the United States - which has enormous scientific sophistication to ensure that, from a scientific point of view, not just from a political point of view, these issues of greenhouse gas emissions are addressed. That is the object of the agreement. The agreement is to work on finding ways of mitigating greenhouse emissions."

Pressed on whether Australia will sign on to the protocol, Downer had this to say: "that is something that we will obviously consider in the fullness of time."

The Doha round of trade talks also featured prominently in the meeting and Downer said there was great interest in the difficulties and opportunities that it posed. He said the matter of whether the Commonwealth would set up a trade office and how to ensure that small states participate fully and equitably in the process were also discussed.

In his address at the meeting of the small states prior to the press conference, Commonwealth Secretary General Don McKinnon added his voice to the debate by arguing that "a world of free trade where some countries have more freedom to trade than others is simply unacceptable. All too often, the message to developing economies has been: `you liberalise, we subsidise'. I hope Doha will mark a change".

He added that the Commonwealth is helping by assisting its member states to integrate their economies with the global trading system. This problem, he asserted, could be addressed through the provision of experts who can help in negotiations. He pointed out that the Commonwealth has been urging developed countries to make a real effort to open up their markets to developing countries and to lower trade barriers.

Asked whether the instability posed by ethnic rivalries in small states was discussed, Downer revealed that the matter had been raised by the Prime Minister of the Solomon Islands Sir Allan Kemakeza who had spoken at length about its debilitating impact on the Pacific Ocean island chain. Downer was non-committal on what could be done about ethnic rivalries of this type but said the issue comes under the rubric of vulnerability of small states. He noted that the United Nations was producing an index of vulnerability based on economic factors but that there had been arguments that the index should also take account of other issues of which ethnic conflict is a component.

Downer said that a list of appropriate concerns to the small states will be drawn up for action to be taken. Terrorism in the aftermath of the September 11 attacks in the US also surfaced at the meeting. McKinnon in his address also publicly thanked Barbadian Prime Minister Owen Arthur for his role in steering the discussions on the World Bank Task Force on Small States.

In addition to Downer and Cox, the press conference also featured remarks by Samoan Prime Minister Tuilaepa Sailele Malielegaoi and the Maldives Foreign Minister of 24 years Fathulla Jameel. Malielegaoi suggested that the Commonwealth could tackle areas such as countering the campaign that was mounted against coconut oil - a staple of many Pacific nations - over its cholesterol content.