OECD Update

Our Spring edition (March 2001) commented in detail on the current position of the Channel Islands with regard to the various releases from the Financial Action Task Force ("FATF") and the Organisation for Economic Co-operation and Development ("OECD").

We previously advised that the Islands have gained the backing of FATF for their impressive regulatory and criminal legal framework, which was further enhanced by the Financial Stability Forum.

Reference was then made to the OECD and the inclusion of Guernsey and Jersey on their tax haven list. In our last edition mention was made that not only offshore centres had been critical of the OECD but that it had come under attack by politicians from major industrial nations.

Events have moved on considerably since then, which firstly saw pressure being brought to bear on George Bush's Government to reject the OECD's "harmful tax competition" initiative. The U.S. Treasury Secretary, Mr. Paul O'Neil received a number of communications from Republican representatives expressing their dissatisfaction with the campaign. It is further understood Colorado Senator Wayne Allard, who serves on the Budget Committee and the Banking Committee stated in a letter to Mr. O'Neil "we could suffer a serious loss of capital if the OECD succeeds in rewriting the rules on international commerce and taxation". All of this pressure resulted in the United States withdrawing its support to the OECD initiative on tax harmonisation.

As far as the Channel Islands are concerned, we are pleased to report that continued dialogue is taking place with the OECD officials. Representatives from our Governments are still providing positive statements that an announcement should be made later this year on the removal of Guernsey and Jersey from the OECD tax haven list.