The Trade Compliance Center sent its Second Annual report to Congress on the Anti-bribery Convention in July. This new ease in moving resources will produce real economic gains in many areas. However, shifting resources simply to take advantage of preferential tax treatment distorts the location of capital and services. It also unfairly erodes the tax bases of other countries. Unfair tax competition in the form of tax havens and harmful preferential tax regimes can also shift the tax burden to people with less mobile assets those who work, hold property and make purchases in their own countries.
Honest citizens can wind up paying more than their fair share of taxes as a result.
The June Ministerial saw the identification of 47 potentially harmful preferential tax regimes in OECD member countries and a pledge by Ministers to eliminate any features of these regimes that are found to be actually harmful by April 2003. In addition, an OECD review identified 35 jurisdictions as meeting criteria for being tax havens. It has been a tough season for illegal or sub-standard financial shelters. In addition to the OECD action on harmful tax competition, the Financial Action Task Force, a G7 initiative which is housed at the OECD, published a review identifying non-cooperative jurisdictions in the international fight against money laundering. The practices in these jurisdictions were deemed to create a potential systemic threat to global financial stability.