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Activists and experts ridicule OECD’s tax havens ‘blacklist’ as a farce

Protestors in London, March 26, 2011 (Credit: nemone / Flickr)

Ahead of the G20 summit of world leaders next week in Hamburg, Germany, the Organization for Economic Cooperation and Development (OECD) released on Wednesday a list of countries that are failing to meet international tax transparency standards.

Only one country made it on the list: the dual-island nation of Trinidad and Tobago.

Tax reform advocates are condemning this as a farce, saying that the OECD’s list doesn’t reflect reality and undermines the progress that has actually been made by giving many tax havens, including the U.S., a pass.

“The OECD has exposed itself as opaque in its search for tax transparency. Its approach means the blacklist of ‘uncooperative tax havens’ is likely to remain near empty and will do little to prevent corporate tax dodging,” Esmé Berkhout, tax policy adviser for Oxfam International, said in a press release today.

To avoid being blacklisted, the OECD set out three criteria on tax information exchange of which countries had to meet at least two. These criteria set standards of information exchange, through which countries notify each other of assets held within their borders by non-citizens.

However, transparency advocates say the criteria are “weak” or “outdated,” allowing countries, like the U.S. and Bahamas, to escape with “extremely weak commitments.” Even ones that were featured on a list of the worst corporate tax havens by Oxfam last year, including the Netherlands, Bermuda, Mauritius and Singapore, were deemed “largely compliant.”

According to the U.K-based Tax Justice Network, Wednesday’s list is reminiscent of a similarly empty blacklist in 2012. That year, the OECD cleared the list completely, because all member states “committed” to transparency by signing basic information exchange treaties with a handful of countries –mostly small ones. The OECD declared the job done.

“Well, 2012 – the job definitely wasn’t done, because we then had the BVI leaks and the Panama Papers and the Swissleaks,” George Turner, director of communications at the Tax Justice Network, told Humanosphere.

Similarly, he said, the OECD has set a low bar this time. One of the criteria, for example, is that a country must be at least “largely compliant” with the Exchange Of Information on Request standard, a bilateral country-to-country information exchange. According to Turner, this standard is outdated and has been proven to not really work.

Instead, the Tax Justice Network has been suggesting another system of automatic and largely multilateral information exchange for years. The OECD has begun to implement this standard, but on this list, only a commitment to Automatic Exchange Of Information was required, with the first exchanges to be made in 2018 at the latest.

“It’s disheartening then to see the OECD fall back into the old pattern of creating ‘tax haven’ blacklists on the basis of criteria that are so weak as to be near enough meaningless, and then declaring success when the list is empty,” Alex Cobham, chief executive of the Tax Justice Network, said in a press release.

According to Cobham and Turner, the U.S. – the OECD’s largest member – should especially be brought to account for its transparency standards. While the U.S. does has a form of automatic information exchange, it’s very one-sided. In essence, the U.S. demands information from other countries about assets that U.S. citizens hold offshore, but it refuses to reciprocate. This has created a climate for states, especially ones like Delaware, Wyoming, Nevada and South Dakota, to become tax havens.

“If you were going to produce a tax haven blacklist with only one member, it wouldn’t be a small Caribbean island – it would be tax haven USA,” Cobham said.

This is particularly egregious, because wealthy nations like the U.S. are not the ones who suffer the most from tax avoidance. It’s developing countries, who are especially dependent on corporate taxes. The Tax Justice Network estimates that between $21 trillion and $32 trillion are being stashed offshore, and corporate tax avoidance is costing world accounts $600 billion a year.

“Tax havens are poaching the rightful tax revenue of other countries, including some of the world’s poorest nations. Yet for many countries, being a tax haven has not delivered prosperity,” Berkhout said.

In fact, the U.N. has condemned the “race to the bottom” in corporate tax rates to attract investors as a human rights abuse.

So what does the OECD gain from setting low bars for nearly every country to pass? As a membership organization of countries, in which some members are the very ones who oppose transparency, low standards are a compromise.

But it’s a dangerous compromise that threatens actual progress that has been made over the last decade. Albeit with large gaps, the implementation of automatic information exchange is a major step forward in transparency, and multinational corporations are improving as well.

“There is progress being made on these issues,” Turner said. “But the OECD prematurely declaring that the war is over doesn’t really help.”


About Author

Joanne Lu

Joanne Lu is a South Carolina-based writer and editor dedicated to global development, poverty alleviation and social justice. After a year in Rwanda, she now covers the Asia-Pacific and economics. Find her on Twitter @joannelu or email