The OECD and its campaign against harmful tax competition: is this international law?



Publication Details

McLaren, J. (2007). The OECD and its campaign against harmful tax competition: is this international law?. Australasian Tax Teachers Association Conference (pp. 1-16). Hobart, Tasmania: University of Tasmania.


Since the late 1990's, the OECD (Organisation for Economic Co-operation and Development) has been very active in its campaign against 'harmful tax competition'. The campaign against tax havens and offshore financial centres involved the naming and shaming of some 36 tax havens. Since then a number of tax havens have agreed with the OECD to reform their bank secrecy laws and to become more transparent in their dealings with other countries. To some extent there have been threats of sanctions against tax havens if they did not agree to co-operate but generally most tax havens have accepted the views of the OECD. The question raised by this is does the OECD make 'law' in the area of taxation policy? If it does, is this 'soft law' and what is meant by the term 'soft law'? The paper will commence with an analysis of what is' international law' and how it is made, followed by a discussion of the distinction between soft and hard international law. The question of what constitutes 'soft law' will then be assessed within the framework developed by Professor Baxter, of international norms being considered soft international law. Having then assessed the OECD guidelines and norms within the 'Baxter' framework, it will be possible to answer the question as to whether or not the OECD makes international law. Some of the OECD member countries have rejected many of the norms contained in the guidelines campaigning against harmful tax competition and some commentators have gone so far as to contend that the campaign has failed to achieve its objectives. If this is the case then there is an argument that in relation to taxation matters, and in particular tax competition which effects the fiscal sovereignty of the nation, the OECD does not make' international law' or if it does, then the soft law is of a non-binding nature.

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