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Barbados
High level Consultation
The
Sherbourne Consensus
On
January 8-9, 2001 Barbados hosted a meeting of Non-OECD
and OECD jurisdictions in order to discuss the OECD initiative
on harmful tax competition. The Prime Minister of Barbados
chaired the consultations. The Honourable Jim Peterson,
Secretary of State (International Financial Institutions),
headed the Canadian delegation. CARICOM's participation
commenced with a CARICOM Caucus on January 7, 2001, which
was chaired by the Deputy Prime Minister of Barbados. The
Barbados delegation included the Minister responsible for
Industry and International, the Attorney General, the Minister
responsible for Education, public officers and members of
the private sector.
The
Territories
The
territories present included Anguilla, Australia, the Bahamas,
Belize, British Virgin Islands, Brunei Darussalem, Canada,
Cayman Islands, Cook Islands, Cyprus, the Czech Republic,
Dominica, France, Germany, Grenada, Ireland, Italy, Jamaica,
Japan, Malaysia, Malta, the United Mexican States, Namibia,
the Netherlands, the Netherlands Antilles, Niue, St. Christopher
and Nevis, Saint Lucia, St. Vincent and the Grenadines,
the Seychelles, Singapore, Sweden, Tonga, the United Kingdom,
the United States of America and the Republic of Vanuatu.
The
Organisations
The institutions present included the Caricom Secretariat,
the Commonwealth Secretariat the OECD Secretariat, the South
Pacific Forum Secretariat, the Caribbean Development Bank,
the International Monetary Fund, The Centre for Inter-American
Tax Administrators, the Inter-American Development Bank
and the World Bank.
The
Speeches
The
following are extracts from the three opening speeches.
-
The Right Honourable Owen S. Arthur, Prime Minister of
Barbados
We
recognise the importance of effective supervision and regulation
We
have no quarrel with the notion that the international financial
services sector must be carefully regulated to ensure against
illegal activity, tax evasion, tax crime and money laundering.
And while we insist that countries have the sovereign right
to determine their own tax policies and to establish tax
rates to satisfy their national revenue requirements, we
also agree that they have a clear responsibility to adhere
to internationally accepted standards of regulation and
supervision of the financial services transacted in their
jurisdiction. Indeed, it is important to recognise that
much has already been done by countries, both individually
and collectively, to enhance their regulatory capacity,
and a considerable amount of experience and expertise has
been exchanged among high level officials charged with the
responsibility. In this region, the work of the Caribbean
Financial Action Task Force is a case in point.
Setting
international tax standards
It
is not accidental that International Tax Law is one of the
areas least codified, since it is an area where the difference
in national systems are such as to make complete harmonisation
an unrealistic objective. This does not mean, however, that
international standards of regulation and cooperation and
best practices cannot be agreed upon progressively, and
cooperative systems put in place to guard against tax crime,
and to guarantee the integrity of the international financial
system. However, such an approach can only be achieved if
it is pursued through dialogue and agreement among all interested
governments, and implemented by common consent in a manner
that is fair, transparent and reciprocal.
Much
common ground on policies
I believe that there is much common ground between the countries
of the OECD and their partners in the developing world on
the question of the functioning of financial services centres.
I believe equally that through a process of genuine and
meaningful dialogue among all interested parties, free from
coercion and the threat of arbitrary deadlines, we can reach
an understanding to move the process forward towards the
progressive resolution of the remaining concerns to the
mutual benefit of all participants.
The
orderly development of a global economy
Indeed,
when the OECD speaks in its report on international standards
in relation to tax policy and practice, it ought to be doing
so from a direct point of accepted reference. It does not.
And that defect robs its work of much of the value it could
otherwise have possessed, because it is difficult to be
legally in default of a system which does not exist in law.
Today
I also submit that this apparent crisis over harmful tax
practice should serve the useful purpose of reinforcing
the perspective that in a global society, problems which
are global in character cannot and must not be resolved
by unilateral action by any one group or countries.
A
new global society must accept the precepts of multilateralism
as its dominant political ideology, much as the new global
economy is being shaped by the universal acceptance of the
legitimising ideology of liberalisation.
The
replacement of economic activity by aid has no place in
the 21st Century
…
[W]e feel that it would be a dangerously backward step,
as has been proposed in the OECD report, to dismantle tax
economic systems and structures for generating real economic
activity to replace them by aid and technical assistance.
Such
retrogression has no place in a 21st Century global economy.
Barbados
will not subscribe to it. It is a matter on which we will
not yield.
- His
Excellency the Right Honourable Don McKinnon, Secretary
General of the Commonwealth
As
we discuss a way forward on this issue we owe it to the
small island States affected to always keep in mind the
fact that much of the developed world advised them that
as their trade preferences diminished due to globalisation
they would need to get into other sectors to survive.
Apart
from the very competitive area of tourism, financial services
was actively promoted.
From
a point of desperation some small States went too fast;
some were given advice by corporations or individuals whose
credentials or qualifications are still in doubt.
We
must sympathise with this fact.
As
a result some states have financial systems that need to
be improved. The States themselves recognise this fact and
need to improve their game. However they should not be blamed
or punished but should be assisted out of their predicament.
Sanctions
against small island States at this premature stage do not
seem fair, when all they were doing was taking competitive
if hasty action aimed at their economic survival.
The
imposition of sanctions will have a dramatic effect on small
island states' economies. Governments will lose a significant
amount of revenue, which will have a direct impact on social
services. This is devastating considering the same States
have not been consulted in this process.
…
We come here as equals. Each country around this table is
a sovereign State with power guaranteed by international
law to manage its domestic affairs without interference.
As
I have already said, the area of taxation is no exception.
We
have come here because we are al committed to the adoption
of competitive tax practices that will both maintain and
attract revenue. We are here because the OECD has kicked
off the process. Someone had to and it was appropriate for
them to do so, however as they also recognise it is now
time for their initiative to be made truly global. And we
in the commonwealth are here to assist this objective.
In
order to do that we must truly wipe the slate clean. Sanctions
and an MOU based on a less than truly multilateral process
to date are not conducive to productive partnerships.
Instead
let's come away from this meeting with an agreement between
equal States to commit to working together to promote improved
tax practices that we can all agree upon.
That's
our challenge. Let us work together at this meeting to make
up for past wrongs, put the record straight, and kick off
a genuine multilateral process. Anything less than that,
even in the beautiful sun of Barbados, is a waste of time;
isn't good enough; won't be helpful; and doesn't do us justice.
-
Mr. Seiichi Kondo, Deputy Secretary General of the OECD
…
We hope that our discussions over the next two days will
enable us to develop a common understanding of the dangers
caused by harmful tax practices for all countries, whether
they are members of the OECD or the Commonwealth, whether
they are developed or developing, or small or big. If we
can achieve such a shared perspective, then this will provide
us with a strong platform to take forward this work in a
spirit of cooperation.
…
I know that there have been accusations that the OECD countries
are trying in some way to destroy the financial service
sectors of smaller jurisdictions. This is certainly not
our objective. On the contrary, we believe that small and
agile financial centres that respect the global principles
of transparency and fairness contribute to the operation
of the world financial system. Equally, it is in nobody's
interest to create a situation where jurisdictions become
dependent on aid handouts from developed countries. Our
aim is to promote financial service sectors that can compete
fairly and openly on a level playing field worldwide and
without being tainted by illegal activities or harmful tax
practices. Our member countries are certainly not afraid
of fair competition. On the contrary, this is one of the
basic principles of all OECD work. As an organisation, we
have been at the forefront of promoting fair competition
economy-wide, both in the services sector and elsewhere.
This is true for taxes as much as for anything else.
The
Remit
By
the end of the consultations, the participants had agreed
to the creation of a joint working group to determine the
way forward on the OECD initiative, and made a broad commitment
to the principles of transparency, non-discrimination and
effective exchange of information. The task of the joint
working group is two-fold:
-
First to take the three principles noted above and to
find a mutually acceptable political process by which
these principles could be turned into commitments. This
process, if successful, would replace the OECD's process
in the context of its Memorandum of Understanding.
- Second,
to examine how to continue the dialogue begun in Barbados.
The Group will examine how the recently created Global
Forum on taxation can evolve into a truly inclusive Global
Forum, which would promote global co-operation on tax
matters. It will also identify further relevant tax issues
for consideration by such a Forum.
The
first working group meeting was held in London, United Kingdom
over the period January 26-28 2001. The intention was to
develop recommendations that could be carried forward to
the Tokyo regional meeting on February 15& 16, 2001.
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