Last week saw the signing of the EU Savings Tax Directive which requires EU countries to exchange information with other member states' tax authorities regarding EU resident's savings accounts.

Certain sectors of the investment industry have cried "foul" over the EU deal which extends to dependent territories of member states, such as Bermuda, but excuses Switzerland and the US.

Although this EU directive is separate and distinct from the OECD black list initiative, it has the effect of undermining the "level playing field" promised by the OECD according to the professional body representing trust and estate lawyers, accountants and bankers (STEP).

According to STEP, without a level playing field, legitimate business, as well as tax cheats, will simply migrate to those jurisdictions excused from compliance with the new standards.

Donald Johnston, OECD Secretary General, wrote privately to the heads of EU Governments in January saying Europe had endangered a global drive to crack down on criminal tax cheats, by excusing three member states from exchange of information.

However OECD continues publicly to insist that non-OECD governments exchange information, despite the harm this will do to their economies because their competitors are excused.

G7 Governments also stated on 23 February 2003 that "A level playing field is crucial to avoid tax evasion shifting from those countries that engage in exchange of information to those that do not."

STEP spokesman Richard Hay of lawyers Stikeman Elliott said "International Financial centres gave commitments to tax information exchange following OECD assurances that common standards would apply to all. The EU Savings Tax Directive now proposes that some important OECD members delay or are excused compliance with tax information exchange. Smaller states will seek to withdraw commitments to information exchange unless the OECD can ensure its own members are bound by the standards it seeks to impose on others."