Regime change: not as easy as it looks. The legacy of the OECD's harmful tax practices initiative: implications for Australia and Vanuatu

Dabner, Justin (2004) Regime change: not as easy as it looks. The legacy of the OECD's harmful tax practices initiative: implications for Australia and Vanuatu. Asia-Pacific Journal of Taxation, 8 (4). pp. 70-97.

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Abstract

In 1998 the OECD issued a report announcing a project to rid the World of harmful tax practices. Targeted were preferential tax regimes that permitted residents of foreign countries to escape their home country tax obligations. The project was premised on fairness and morality, namely that those who enjoy the benefits of a welfare state should make a fair contribution to its maintenance.

From the outset the process adopted by the OECD was authoritarian and threatening. Particularly divisive was its differentiation between member and non-member states. Those in the latter category with preferential tax regimes were labelled tax havens and the real focus of the project soon appeared to be directed at these countries.

The tax havens’ primary response was to point to the inequity in the absence of a level playing field arising from the intransigence of a number of OECD states and other developed nations to removing their preferential tax regimes. Faced with opposition, particularly from the United States, the OECD’s project evolved to focus on the need for tax regime transparency and international information exchange agreements.

This placed the project in accord with a number of other international initiatives directed to similar ends. Faced with overwhelming international pressure all but five of the tax havens have committed to co-operate. Notwithstanding that these commitments are premised on a level playing field, and whether this can be achieved is problematic, it may nevertheless be in the interests of the tax havens to take the initiative and embrace the principles of transparency and information exchange on their terms.

Such terms might ensure a proper balance between the rights of nations and of taxpayers. Furthermore, in the negotiation of information exchange agreements the commercial value of the information sought by the developed nations should be recognised by both parties. The application of these propositions can be illustrated by reference to the relationship between Australia and the tax haven Vanuatu.

There is a long way to go but there is every possibility that a project, whose process spurred recriminations and emotional rhetoric, might yet lead to a result that promotes the principles of morality and fairness for all parties concerned.

Item ID: 219
Item Type: Article (Refereed Research - C1)
Keywords: taxation law; OECD harmful tax regimes project; Australia; Vanuatu; tax havens
ISSN: 1027-5592
Date Deposited: 28 Aug 2006
FoR Codes: 18 LAW AND LEGAL STUDIES > 1899 Other Law and Legal Studies > 189999 Law and Legal Studies not elsewhere classified @ 50%
14 ECONOMICS > 1402 Applied Economics > 140210 International Economics and International Finance @ 50%
SEO Codes: 91 ECONOMIC FRAMEWORK > 9101 Macroeconomics > 910110 Taxation @ 100%
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