The Organization for Economic Cooperation and Development

The Organization for Economic Cooperation and Development (OECD) is an international organization, which has a mandate of helping governments tackle the economic, social and governance challenges of a globalised economy. The OECD is comprised of thirty member democratic countries that produce two thirds of the world’s goods and services. Its member countries are primarily located in Western and Eastern Europe, but also include the United States, Canada and Mexico. In addition to its member countries the OCED also have active relationships with some 70 other countries, non-governmental organizations and civil society.

The OECD was formed in 1961, and grew out of the Organization for European Economic Co-operation (OEEC), an organization charged with administering aid for the reconstruction of Europe after World War II. The OECD evaluates just about every area of the global economy – such as agriculture, biotechnology, economics, energy, the environment, health, sustainable development, taxation and trade, just to name a few. The organization provides the forum whereby member countries could discuss, develop and refine policies that govern such areas as indicated above.

One of the key areas of concern of the OECD as it affects the Bahamas is taxation. In 1998, the OECD issued a report entitled “Harmful Tax Competition: An Emerging Global Issue”, in which it outlined its international framework to counter the spread of harmful tax competition, specifically the spread of tax havens. The report outlined the criteria for identifying tax havens – which included countries that have no or nominal income tax, no effective exchange of information on tax, lack of transparency and that facilitates the establishment of foreign owned entities without the need for local substantive presence. The stated objective of the OECD’s efforts to eliminate harmful tax practices is to encourage an environment in which free and fair tax competition can contribute to economic growth and development worldwide, and not to dictate to any country how its tax system should be structured or what its tax rates should be.

In a subsequent report in 2000, titled “Towards Global Tax Co-operation – Progress in Identifying and Eliminating Harmful Tax Practices”, the OECD outlined its progress based on the goals set in the report of 1998. In this report, 35 jurisdictions were identified as tax havens that engage in harmful tax practices – the Bahamas was included in this listing. In order to avoid being included on the OECD’s list of Uncooperative Tax Havens (published in April 2002) and being subjected to possible defensive measures of the OECD, the jurisdictions listed in the 2000 report were required to make public commitments to the OECD in relation to transparency and the effective exchange of information. The Bahamas made its commitment to the OECD in relation to establishing a process for the effective exchange of information and for transparency in March 2002. The Bahamian government is continuing its negotiations with the OECD to ensure that a level playing field is obtained and that a fair solution is reached. The Government has stated that it will ensure whatever is agreed upon does not disadvantage The Bahamas in comparison to other international financial centres either within or outside the OECD group of countries.