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Offshore Finance Regulations
The bullying has been painful to watch. For months, the Organisation for Economic Cooperation and Development and its army of member-states have pushed offshore financial centres around the global playground.
The threat was huge. Either the offshore centres exposed their customers to ‘fishing expeditions’ by onshore governments looking for tax evaders, and reformed their so-called ‘harmful’ tax practices, or the OECD member states would be allowed to impose sanctions, such as withholding taxes.
The offshore centres - many of them small economies whose main income is financial - cried for support. None seemed to be forthcoming. New (and not so new) left governments in the UK, the US and France appeared united in their desire to end tax ringfencing and increase transparency. But that was before Bush, a republican and a libertarian to boot, grasped power in the US. July - the cut off date for commitment to reform - was fast approaching. But at the eleventh hour, the prefects - in the shape of the US Treasury - came marching into the playground to cut out the bullying. Offshore Finance Regulations & Investment International As Investment International suggested in January, after Bush was finally elected president, the arrival of a right-wing government has punctured the OECD initiative. Bush’s recently sworn-in Treasury Secretary, Paul O’Neill said, “Recently, I have had cause to re-evaluate the United States’ participation in the Organization for Economic Cooperation and Development working group that targets ‘harmful tax practices’. “I share many of the serious concerns that have been expressed recently about the direction of the OECD initiative. I am troubled by the underlying premise that low tax rates are somehow suspect and by the notion that any country, or group of countries, should interfere in any other country’s decision about how to structure its own tax system. Offshore Finance Regulations - Non-EOCD Countries “I also am concerned about the potentially unfair treatment of some non-OECD countries. The United States does not support efforts to dictate to any country what its own tax rates or tax system should be, and will not participate in any initiative to harmonize world tax systems. The United States simply has no interest in stifling the competition that forces governments, like businesses, to create efficiencies.” The yelps of delight in the Carribbean - where many US residents house their pennies in trusts and companies, entirely legally, of course - have yet to subside. As predicted, the US appears to take a more libertarian view of offshore finance. The grumpy OECD, though, is pretty much denying there has been any damage at all to its politically-motivated projects. The organisation’s spokesman told this magazine: “Mr O’Neill plainly states that he is in favour of international cooperation to end illegal tax evasion. His statement contains a series of misrepresentations about what the OECD project is about. Offshore Finance Regulations & Minimum Tax Rates “It does not attempt to set minimum tax rates or harmonise tax systems, so saying that the US is not in favor of such action in no way contradicts the OECD project or the intentions of the other countries. This misrepresentation of the OECD project appears to have its roots in internal US politics on which we are not able to comment.” He said the July deadline still stands for offshore centres to commit to reform and that coordinated ‘defensive action’ was still expected by other OECD member states. 
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