Tonga warned of July ultimatum in OECD war against tax havens [1]
Saturday, June 30, 2001 - 10:00. Updated on Friday, January 29, 2016 - 17:30.
From Matangi Tonga Magazine, Vol. 16, no. 1, June 2001.
If by July Tonga has not repealed its 1984 Off-Shore Banking Act, the 29 member countries of the Organisation for Economic Co-operation and Development (OECD) will endorse a ‘Defensive Action’ against Tonga and six other Pacific island countries.
Tonga’s Attorney General, and Minister of Justice, Hon. Tevita Tupou, who represented Tonga at a meeting with representatives of OECD countries earlier this year, said that ‘Defensive Action’ means that OECD member countries could put into place, “programs to make it difficult for financial transactions between the seven Pacific countries that have been black-listed by OECD countries and the rest of the business world. This action will be on a bilateral basis between each country and not by the OECD countries as a whole. So it will be a matter for each OECD member to decide how they treat those countries that are black-listed.”
The countries concerned are Tonga, Samoa, Cook Island, Niue, Nauru, Marshall Islands and Vanuatu. Tevita said that New Zealand and Australia were members of the OECD, and if they decided to take action against Tonga it could be in the area of aid and money transactions. “The Defensive Action program will run until 2005, when they believe there will be no more tax havens in the world.”
Minority
The OECD’s 29 members form a minority group within the 200 countries of the world, but because they include some of the industrialised and wealthiest countries, such as the U.S.A., the U.K., Japan and France, they feel that they have the power and the might to tell the rest of the world what to do.
Tevita said that the main concern of OECD countries was that their nationals make their money in their own country and then go and register their companies elsewhere and that is what they wanted to stop. “But of course they also have nationals who make their money elsewhere and then register in these tax haven countries. Their earnings were not from their own country.” He said that all of the South Pacific Forum countries were united in their opposition to decision by the OECD. “We are asking for a dialogue, we feel that they have not given us enough time, they just went ahead and imposed conditions, and set a deadline but we have not given them our views.
“They are saying that we have stolen their tax money because the companies from their countries come and register in our countries because of our tax free system.”
The irony of the situation is that off-shore banking started in Europe and there are countries in Europe with off-shore banking facilities. “There are countries in the Caribbean, the Mediterranean, Luxemburg, Hong Kong, and even some states in the U.S.A. operating off-shore banking facilities, but the names of these countries were not even mentioned in our discussion.” He said that when the issue of Harmful Tax Practice was raised the first question that came to mind was harmful to whom?
“There are a number of countries that have off shore banks, and are tax havens. They attract business from other countries because it is tax free, but the countries who become tax havens earn revenues from registration fees of banks and companies. …I do not consider this as being illegal money laundering or criminal activities. All the Forum countries are against those illegal practices.”
Tevita said the OECD countries considered it a harmful practice. “What they are referring to is that if their tax money is not paid by these companies, which are registered in these small countries, it will have an impact on their aid to these countries.”
Parliament
He was optimistic that the Legislative Assembly would terminate the 1984 Off-Shore Banking Act in this year’s parliamentary session and that Tonga would be removed from the OECD black list.