CARICOM still concerned about OECD “gray” listing
On Friday, Secretary-General of CARICOM,. Edwin Carrington, and Mr. Philip Kentwell, the first Plenipotentiary Representative of Australia to be assigned to CARICOM, began a new chapter in the history of the community.
As he welcomed Kentwell and the Australian Government’s overtures of improved relations between the regional agency and Australia, Carrington called for its newest international partner to be their voice at those fora where the community could not itself maintain a presence.
He noted that the International Financial Institutions and other major international policy makers of the G8 and G20 countries “… must be made to be more aware of and responsive to the needs of us small highly indebted countries particularly in the area of the financial services sector.”
He said that the need exists for further sensitization of the Organization for Economic Cooperation and Development (OECD) to the fact that the financial services sectors in CARICOM countries are critical to national development.
Despite the strain CARICOM countries have still sought to comply with the pertinent international regulations. These include the recent Internationally agreed tax standards which the OECD has been seeking to implement globally in an attempt to bring financial transparency to the murky waters surrounding tax ‘havens’ and the issues of tax evasion and laundering of illicit funds.
According to Carrington, despite the region’s efforts at compliance however, CARICOM’s “… member states continue to be subjected to categorizations and penalties injurious to (their) national development.”
A number of the member states are “gray” listed on the OECD Progress Report for implementation of the Internationally Agreed Tax Standards indicating that they have committed to the Standards but not implemented them to the extent required.
In a campaign started against wealthy tax evaders in April 2009 by the leaders of G20 countries, the OECD sought to introduce standards that would require the exchange of information upon request in all tax matters for the administration and enforcement of domestic tax law without regard to bank secrecy for tax purposes.
The standards also provide for extensive safeguards to protect the confidentiality of the information exchanged. What that meant was that countries with especially large offshore banking sectors relative to their economy sizes would need to sign bilateral Tax Information Exchange Agreements (TIEAs) – with at least 12 other nations to be considered in compliance with the requirements.
According to the Tax Justice Network there may be approximately US$11 trillion worth of assets being held in tax havens around the world. The Tax Justice Network is an independent organization launched in the British Houses of Parliament in March 2003 for the express purpose of monitoring taxation and the corresponding regulations as well as preparing research and analyses on the matter from a global perspective.
Funds obtained through illegal methods or upon which the holder does not want to pay the requisite taxes are usually laundered through tax havens and end up returning to these very same G20 countries as ‘clean’ dollars on which no taxes have been paid.
There is also the issue of capital flight from poor and highly indebted countries where the funds are simply being bled out of the system with no way to ensure that the country’s accounts retain the necessary revenues for reinvestment towards national growth, a situation which further exacerbates the developmental issues that face these countries.
A number of CARICOM heads are arguing that there are a financial centres in both Europe and the United States whose dealings cannot be called transparent either but yet these small countries in the Caribbean are being singled out in a manner that can only be called ‘discriminatory’.
President Jagdeo himself brought the matter to light in discussions with the President of the World Bank, Robert Zoellick, late last year during a visit to Istanbul, Turkey.
He noted that the issue needed to be addressed in short order since it would mean a diversion of funds from the region to other parts of the world. Such a diversion would pose a threat to the strength of the financial services sectors of most CARICOM countries, many of whose economies stand on only two pillars – financial services and tourism – both of which were hit hard in the recent economic crisis.