The Legacy of the OECD's Harmful Tax Practices Initiative : Implications for Australia and Vanuatu

In 1998, the OECD issued a report announcing an initiative to eradicate harmful tax practices world wide. Non-OECD states with preferential tax regimes were labelled tax havens and the focus of the report soon became these countries.The tax havens' primary response has been to point to the absence of a level playing field. As a result, the OECD's initiative evolved to focus on the need for tax regime transparency and international information exchange agreements.This placed the initiative in accord with other international initiatives directed to similar ends. Faced with overwhelming international pressure, all but five of the tax havens have committed to co-operate. The critical issue now is as to how the principles of transparency and information exchange will be embraced.This paper argues that a proper balance between the rights of nations and of taxpayers must be maintained. This proposition is illustrated by reference to the relationship between Australia and the tax haven Vanuatu. A way forward for these two countries that acknowledges the commercial value of the information sought by Australia and contains protections for taxpayers is outlined. This proposal could serve as a blueprint for the implementation of tax havens' commitments to the OECD