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Wednesday, 27 February, 2002, 17:53 GMT
Channel Islands agree tax haven deal
Guernsey and Jersey in the Channel Islands have signed up to an international programme to block tax evasion.
The Caribbean countries of Grenada and St Vincent & the Grenadines have also agreed to come on board.
The agreement, under the auspices of the Organisation for Economic Co-operation and Development (OECD), means they have committed to sharing information about suspected tax evasion and improving the transparency of their regulatory systems.
"We look forward to being heavily involved in the development of global standards for information exchange in civil matters and transparency," said Laurie Morgan, president of the Advisory and Finance Committee of the States of Guernsey.
And IFAOnline, a trade news website for independent financial advisers, has discovered that Gibraltar is in the final stages of following suit.
Both Jersey and Guernsey have till now been scathing about the programme, in private calling it an attempt to remove competition from major banking centres.
While most OECD members have signed up to similar measures, both Switzerland and Luxembourg have refused.
Any country or territory on the OECD's list which has not agreed to co-operate by 28 February could be liable for sanctions from the OECD's 30 member states, which could include restrictions on banking business.
An OECD spokesman told BBC News Online that the list is likely to be published in March or April. "Co-ordinated defensive measures" could happen as early as April 2003.
Any jurisdiction missing the deadline is liable to face them, he said - although he indicated that late arrivals would not necessarily be turned away.
Sanctions could cripple those left on the list, which are largely small states whose financial services industries provide most, if not all, their foreign exchange.
Whether sanctions will actually materialise, though, is another story.
The OECD's programme has been backed particularly by the US, the UK and Australia.
The UK Treasury has been exerting huge pressure on Jersey and Guernsey, for example.
Last year, Treasury Secretary Paul O'Neill told a Congressional committee that the OECD should not seek to coerce other countries into changing their tax systems.
A number of influential right-wing lobby groups see tax evasion as a perfectly legitimate part of their crusade against tax and government in general, and have the ear of senior Republican legislators.
In the wake of 11 September, and after the OECD backed off from some of its demands, support for sanctions returned in some measure - although opinion among Republicans remains split, and Mr O'Neill is still thought to be less keen than the rest of the administration.
But just as Guernsey and Jersey have relented, a group of Pacific islands are deciding to fight on.
Vanuatu, Niue and Nauru have all told the OECD that its own members need to get their houses in order before looking further afield.
"There's no level playing field," he said. "It's a neo-colonial attitude all over again."
Vanuatu has 150,000 people scattered across 80 small islands, and Mr Carlo said the employment from legal firms and trusteeships was as important as the $2.5m a year it earns from banking fees.
That, he said, was nothing compared to OECD members, but vital to his country's $80m annual budget.
Niue, meanwhile, has only a few thousand people, and earns about $1.6m a year from banking.
Nauru has been the most bellicose, despite allegations that it has provided the conduit for the laundering of billions in Russian mafia money.
The initiative itself - which the OECD calls an attempt to prevent "harmful tax practices", as the OECD calls it, began in 2000 with a list of 35 countries and jurisdictions which the organisation said effectively allowed tax evasion.
By 31 July 2001, they were all meant to have agreed to open up or face "defensive measures".
But pressure from the non-OECD countries on the list, led by Barbados Prime Minister Owen Arthur, forced delay after delay, while the cooling of US ardour took the original demand to change tax rates off the agenda.
Since then, a number of those on the list have decided to play ball, promising to improve oversight and allow information sharing.
Barbados, meanwhile, has achieved its original aim: an OECD statement which accepts that by most standards it should never have been on the list in the first place.
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