Over the last few years the OECD has persuaded 31 tax havens to scrap harmful tax practices and exchange information by December 2005. Those that have not complied have been placed on a blacklist and been threatened with sanctions and having favourable tax treaties scrapped.
Countries like the US and Britain believe an open exchange of bank information between nations is crucial to fighting money laundering and tax evasion.
But at the OECD’s September meeting Switzerland and Luxembourg blocked agreement on a common definition on tax fraud that could apply during an exchange of bank information between nations, the FT reported.
They also joined Austria and Belgium by objecting to a December 2005 deadline for access to information about the tax status of residents.
A meeting in Canada next week will address the issue, with one option being to scrap the current strategy and adopt the EU savings tax directive, which allows Austria, Belgium and Luxembourg to apply withholding taxes until at least 2010.
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Unincorporated businesses under the VAT threshold given an extra year to prepare before MTD becomes mandatory