BBC News Online: Business

Sanctions threat to 'tax havens'

Among those on the blacklist are the British Channel islands Guernsey and Jersey plus the Isle of Man, off the North West coast of England.

Others include countries like Andorra, Monaco and Panama, British overseas territories like Gibraltar and Montserrat, and Commonwealth members like Bahamas and Barbados.

The list of tax havens was compiled by the Organisation for Economic Cooperation and Development (OECD), setting criteria for "harmful tax competition", where countries seek to attract people or companies that try to launder money or avoid paying tax on their income.

"The project is about ensuring that the burden of taxation is fairly shared and that tax should not be a dominant factor in making capital allocation decisions," the OECD said in a statement.

The OECD links the world's most industrialised economies of Europe, North America and Japan.

The offending countries have now been given until the end of the year to co-operate with the OECD, and complete their reform programme by the end of 2005.

Sanctions undefined

Those failing to "eliminate harmful features of their regimes" are being threatened by the OECD with "defensive measures".

However, OECD countries have yet to define the nature of the sanctions they want to impose.

The French government, one of the driving forces behind the attack on tax havens, has suggested a ban on financial dealings with countries that fail to co-operate in the fight against money laundering.

The original list of tax havens was even larger, but Bermuda, Cayman Islands, Cyprus, Malta, Mauritius and San Marino recently told the OECD that they were committed to eliminating harmful tax practices.