Letter of 27th January 2003 from Sir Ronald Sanders, Antigua and Barbuda's Chief Negotiator on International Financial Services to Mr Donald Johnston, Secretary-General of the OECD on the absence of a level playing field

Antigua and Barbuda High Commission
15 Thayer Street, London W1U 3JT
Tel: +(0) 20 7486 7073 Fax: +(0) 20 7486 9970
E-mail:antiguahc@msn.com
Internet Web site: www.antigua-barbuda.com

His Excellency Sir Ronald M Sanders KCN, KCMG
Chief Foreign Affairs Representative with Ministerial Rank and
High Commissioner to the Court of St James's

Via fax: 011 33 1 44 30 63 21 and post

27th January 2003

Mr Donald Johnston
Secretary General
OECD
2 RUE André Pascal
75775 Paris Cedex 16
France

Dear Secretary-General

You will recall that I wrote to you on 13th December 2002 stating that "in light of the recent statement by the Presidency of the European Union that certain OECD member countries have been granted until 2011 to implement exchange of information provisions on tax matters, seven years after the deadline for implementation of the same provisions by non-OECD member states, the Government of Antigua and Barbuda considers that the conditionality of a "level playing field" amongst participating members of the Global Forum no longer exists".

I had emphasised to you that, in common with Panama, the Cayman Islands and many other participating nations engaged in the Global Forum process, the concept of a "level playing field" was central to the good faith participation of Antigua and Barbuda in the whole OECD harmful tax exercise, and indeed was a specific, written condition of our participation.

In my letter of 13th December I asked that you "consider the necessity of convening a special meeting of the Global Forum early in the New Year to inform all participants of the situation in regard to the position of certain EU member states and to examine whether or not a sufficient consensus remains to render the work of the OECD Secretariat in the Global Forum viable in the months ahead".

I am aware that the Government of St Vincent and The Grenadines has also now written to you supporting this idea.

You very kindly wrote to me on 29th December 2002 stating that "whatever the outcome of the EU discussions, we (the OECD) will continue to work towards a level playing field, effective exchange of information and the implementation of the OECD's 2000 Report, Improving Access to Bank Information for Tax Purposes".

Since then the outcome of the EU discussions have been made public, and they clearly show that a level playing field no longer exists. Indeed, it also shows that, whereas we thought that certain countries were given until 2011 to conform to exchange of information requirements, they have been given an open-ended arrangement.

The EU Council of Economic and Finance Ministers decided as follows on 21st January 2003:

With regard to Austria, Belgium and Luxembourg, they will not be required to exchange information. They will apply a withholding tax on savings held by residents of other member states (15% from 1st January 2004; 25% from 1st January 2007 and 35% from 1st January 2010).

These three countries will implement exchange of information agreements if and when the EC enters into an agreement by unanimity in the Council with Switzerland, Liechtenstein, San Marino, Monaco and Andorra to exchange of information upon request as defined in the OECD Agreement on Exchange of Information on Tax Matters, and if and when the Council agrees by unanimity that the US is committed to exchange of information upon request as defined in the 2002 OECD Agreement for the purposes of the Directive.

With regard to Switzerland which is NOT an EU member but is a member of the OECD, the Council decided:

Retention and Withholding Tax: Switzerland will apply the same rates of retention and withholding tax as Belgium, Luxembourg and Austria.

Revenue sharing: Switzerland will share the revenue of the retention tax and will accept the 75/25 division applied within the Community and may even be prepared to reduce the percentage of 25 depending on the "overall balance of the agreement". However the revenue sharing provisions will only apply to the new retention tax and not the existing withholding tax.

Voluntary disclosure of information

Review clause stating that the Contracting Parties shall consult with each other at least every three years or at the request of either Contracting Party with a view to examining, and if deemed necessary by the Contracting Parties, improving the technical functioning of the Agreement. In any event when Belgium, Luxembourg and Austria change from withholding tax to automatic exchange of information, in accordance with the Directive, the Contracting Parties shall consult each other in order to examine if changes to the agreement are necessary taking into account international developments.

The Council also agreed that the EU should enter into similar agreements with Liechtenstein, Monaco, Andorra and San Marino.

It is now patently and blatantly obvious that no level playing field exists and jurisdictions, such as Antigua and Barbuda, that have committed to participate in the OECD Global Tax Forum are being placed at a severe disadvantage.

You did not respond to my Government's proposal that you "consider the necessity of convening a special meeting of the Global Forum early in the New Year to inform all participants of the situation in regard to the position of certain EU member states and to examine whether or not a sufficient consensus remains to render the work of the OECD Secretariat in the Global Forum viable in the months ahead".

Indeed, your organisation has continued to issue documents adumbrating new standards as if nothing has changed.

However, everything has changed, and my Government does not see how it would be possible to continue to respond to OECD documents purporting to set new standards which will clearly apply only to non-OECD jurisdictions.

All the non-OECD jurisdictions are being placed in a very disadvantageous position in relation to competition in the provision of international financial services.

In these circumstances, I have to advise that my Government does not consider it appropriate to respond to any OECD documents until a meeting of the Global Forum is held when all jurisdictions could collectively decide whether there is any basis for further commitment to the OECD's initiative to eliminate tax competition.

I look forward to hearing from you.

With regards

Sir Ronald Michael Sanders KCMG, KCN
Chief Foreign Affairs Representative with Ministerial Rank
and High Commissioner to the Court of St James's