The Organisation for Economic Co-operation and Development (OECD) campaign against what it calls “harmful tax competition” ground on yesterday with news that the Swiss authorities have, after three years of commendable resistance, partially caved in to the bullying of the OECD and agreed a compromise over two Swiss tax practices deemed “harmful” by the OECD.
Switzerland yesterday agreed to exchange information with other countries on Swiss-based holding companies and to warn Swiss-based service companies they must abide by OECD guidelines on “transfer pricing” activity, which determines how groups allocate profits to their subsidiaries. There was no agreement on the tax regimes offered to Swiss-based finance and leasing companies.
The deal is bound to encourage anti-tax competition fanatics within the OECD as they press Switzerland to force its banks to co-operate with its “crackdown” on tax evasion. The OECD’s 2000 report on “harmful tax practices” identified several countries among the OCED membership guilty of this crime against heavy-spending governments, and the Paris-based organisation has succeeded in bullying most into submissive reforms.
Switzerland and Luxembourg have led the resistance to the OECD campaign on tax evasion, though in September last year they were joined by Austria and Belgium in refusing to support a deadline of 2006 for exchange of banking information that would enable tax authorities to verify the liabilities of people who put funds outside their home countries.