The concept of harmful tax competition : implications for tax havens and preferential tax regimes

Abstract

This thesis analyses one of the latest developments in the field of direct taxation, namely the concept of Harmful Tax Competition. In a bid to protect their tax base against 'poaching' by tax haven countries or through preferential tax regimes in non-haven countries, the Member States of the Organisation for Economic Co-Operation and Development (OECD), have on the 9th of April 1998 adopted the 19 recommendations forwarded by the OECD Committee on Fiscal Affairs in its 1998 report; Harmful Tax Competition: An emerging global issue. The OECD also received the support of the G7 whose Members have committed themselves to follow closely any future developments in this regard. The European Union, primarily through the work of the Commission, has contemporaneously also addressed the question of Harmful Tax Competition, within the context of the interests and requirements of the European Union and its Member States. The European initiative which will culminate in the adoption/implementation of a 'Package to Tackle Harmful Tax Competition' has succeeded in achieving unprecedented levels of Member State co-operation in the field of direct taxation, an area which had in the past been jealously protected as one of the final bastions of State Sovereignty. This thesis analyses the developments which have led to the initiatives taken in both the OECD as well as the EU fora and the raison d'etre behind the said initiatives; identifies the jurisdictions/ activities targeted by the OECD and EU approaches; analyses in detail the Recommendations adopted by the OECD Council and the EU 'Package to Tackle Harmful Tax Competition' and finally draws certain general conclusions on the implications of the respective initiatives for different countries and jurisdictions world-wide.