Pacific Islands Forum to talk tax in Tokyo

Pacific Islands Forum members will discuss international tax issues at a meeting in Tokyo this week, as well as concerns relating to the operation of offshore financial centers and related tax initiatives.

The International Taxation workshop in Tokyo, Japan Feb. 15-16, 2001 is being hosted by the Government of Japan in association with the Organization of Economic Cooperation and Development (OECD) and the Pacific Islands Forum Secretariat.

The workshop aims to provide an international forum where the Forum and the OECD can discuss and enhance mutual understanding of international tax issues including Globalization and tax, E-Commerce and the OECD’s Harmful Tax Competition Initiative.

This last issue is one of critical importance to the seven Forum members (Cook Islands, Nauru, Niue, Samoa, Tonga, Republic of Marshall Islands and Vanuatu) on the OECD’s June 2000 list of so-called “tax havens.”

The Harmful Tax Competition Initiative is aimed at slowing what OECD nations believe is the unfair erosion of their tax bases through mobile financial activities, such as those offered by offshore financial centers.

Such activities can attract capital away from OECD member countries, supposedly depriving them of potential tax revenue. The Initiative also aims to reduce the role that taxation levels play in business capital allocation decisions.

The OECD request for these nations to agree to an OECD-developed Memorandum of Understanding or else risk “defensive measures” from the 29 OECD nations, following a July 31, 2001 deadline, has placed a dark cloud over the future operations of the offshore financial centers, including those in the Pacific.

Offshore financial centers contribute as much as 8-10 percent of GDP to those small, developing Pacific nations where they are located. Any punitive measures will have severe impacts on government expenditure across all sectors, employment, activities of related industries, and the long-term economic growth of these small nations.

The commitment of Forum members towards resolving this issue was first made by Forum Economic Ministers at their July 2000 meeting and is being expressed through participation in a joint Working Group on the OECD’s Harmful Tax Initiative, comprising both OECD and affected Commonwealth jurisdictions.