Barbados - 'Tax Havens,' Critics Seek Common Ground |
by Angus MacSwan
January 7, 2001 - (Reuters)
BRIDGETOWN, Barbados - The fight against international money-laundering and tax evasion will be rejoined in Barbados from Monday when officials from ``tax havens'' and their critics in the world's wealthiest countries debate the vexing issue of offshore financial centers.
The United States, Britain and other countries grouped in the Organization for Economic Cooperation and Development (OECD) want the tax havens to agree to a timetable for cooperation and committing themselves to easing their bank secrecy laws.
They say the financial services industry, which has mushroomed in recent years in small nations and territories in the Caribbean and elsewhere, are awash in dirty money from the drugs trade, tax cheats, fraudsters and other crooks.
Last June they issued a blacklist of 35 ``tax havens'' and threatened punitive action if signs of cooperation were not forthcoming.
But their campaign has enraged many of the targeted nations and territories, who accuse the powerful nations of bullying them and infringing their sovereignty.
The Caribbean Development Bank's president, Sir Neville Nicholls, has called the OECD campaign a ``bad joke'' that could destroy small, vulnerable economies.
Tempers have cooled since the OECD issued modified proposals in November, and the watchword at the meeting in Barbados, which is on the blacklist, is cooperation not confrontation.
United Search For Solutions
``If it is perceived that money-laundering can be a problem, we do not want it. And if the OECD is confident that it is a real issue, then we expect them to work together with us to solve it,'' said Grenada's prime minister, Keith Mitchell.
``But it must not be a big hammer coming down on our heads. We must sit down together and look at the problems,'' he added.
What the United States and its allies are gunning for are the bank secrecy law that have made otherwise exotic but relatively obscure place such as Antigua or St. Kitts favorite places to stash cash. U.S. estimates put the amount of money in offshore accounts in excess of $5 trillion.
The Russian mafia, Colombian drug barons and others have used the small countries' ask-no-questions policy to launder and hide their ill-gotten gains, often through shell corporations or ``brass plate'' companies that proliferate in some countries on the blacklist.
``There's a lot of nasty money down there,'' said Charles Intriago, publisher of the Miami-based Money Laundering Alert newsletter.
But there are also billions and billions of dollars handled by legitimate corporations passing through, with international lawyers and investors taking advantage of the tax and secrecy laws to maximize their gains through International Business Companies (IBCs), International Trusts and a myriad of other devices.
Speaking in Paris Friday, OECD Secretary General Seiichi Kondo said the big powers were not targeting the jurisdictions.
``We are combating tax evaders, tax abusers ... honest tax payers suffer from tax evasion.''
A source close to the talks told Reuters the OECD was willing to let offshore centers set their own tax rates but that they wanted greater transparency and cooperation with investigations into suspect money.
'Piece Of The Action'
The other view, from one Miami-based financier, was, ``The United States, Britain and the others just want a piece of the action.''
The U.S. government says one problem is that tax evasion has in the past been viewed as a harmless practice, merely taking advantage of loopholes. That notion has created a ``swamp in which financial criminals breed,'' the State Department has said.
The Paris-based OECD considers a country a tax haven if it has nominal or no taxes and which offers itself as a place where foreigners can avoid awkward questions or risk information on their investments being disclosed.
In November, the OECD offered the listed tax havens a quick route to escape the blacklist. It said it would remove the threat of sanctions from havens that sign a collective pledge of commitment to transparency and cooperation.
They will have until the end of 2001 to set out detailed timetables for dismantling ``most harmful'' measures. By the end of 2003 they would have to cooperate fully with tax authorities in other countries investigating tax crimes and by the end of 2005 provide ``effective exchange of information on all tax matters.
The havens say they are willing to assist in criminal investigations but not otherwise. They also say they held to tougher rules than some OECD members, notably Switzerland.
Barbados Prime Minister Owen Arthur, who has been a standard bearer for the small nations, said in London in November that he thought an agreement could be reached. But the island's leading newspaper, the Daily Nation, reminded him the stakes are high.
``Our offshore financial sector is under very serious threat and a national effort must be mobilized in support of Prime Minister Arthur and his team when they sit down Monday and Tuesday to literally fight for this country's survival against the unprincipled onslaught being levied by the powerful and economically stronger countries which make up the OECD club'' it said in an editorial.''
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