international attempt to create a blacklist of designated "tax havens,'' an effort many small offshore centers view as a bullying threat to their sovereignty.

The Organisation for Economic Cooperation and Development is scheduled to produce the final list of tax havens in June as part of a campaign to force changes in jurisdictions with tax policies it considers harmful to the world economy.

Governments that refuse to change will be subject to OECD ''coordinated counter-measures,'' widely interpreted as sanctions.

Many Caribbean bankers view the OECD campaign as an attempt to impose Old World financial structures on New World economies in the era of globalisation.

At the recent Miami Business Conference on the Caribbean and Latin America, Caribbean bankers condemned the plan as "a blunt instrument to bludgeon smaller jurisdictions'' into adopting tax structures that may not be in their own best interests.

"The OECD is trying to act as global tax police,'' said Penny Ettinger, vice president and director of trust services for Bayshore Bank in Barbados. "This approach focuses on punishing the regions that make their (tax) rates more attractive.

"There appears to be confusion between the concept of tax evasion and tax avoidance Tax avoidance can be very legitimate,'' Ettinger said. "They perceive it as `tax leakage' from holes in the dike.'' The OECD defines a tax haven as a jurisdiction that imposes few or no taxes, is used or perceived to be used by non-residents to escape taxation in their homelands, and has laws that safeguard banking secrecy.

The OECD includes economically developing nations such as Korea and the Czech Republic, but is comprised mostly of the G-7 industrialised nations and much of Europe and Scandinavia .

Many of its 29 member nations have traditionally had high taxes on income and fear the loss of capital that flows to offshore banking centers with low or no income taxes.

The International Monetary Fund estimates the money stashed in offshore havens grew to $4.8 trillion in 1997, from $3.5 trillion in 1992.

In the OECD view of the offshore centres, "They're too attractive to investors and must be stopped,'' said Graham Mather, director of the European Financial Forum think-tank and a former member of the European Parliament.

But that approach does not take into account the needs of the islands, which have relied more on indirect taxes, such as customs and duties. The OECD plan relies on blacklists and group pressure to force offshore centres to adopt policies their own legislatures would never pass, Mather said.

"Nobody listens to small countries,'' said Michael Murphy, director of American International Co., an insurance firm in Bermuda.

Many Caribbean islands have turned to offshore banking to boost economies that had depended on faltering banana and sugar industries and fickle tourism.

Without the banking revenues, law enforcement officials fear the islands would become more vulnerable to rogue industries, such as drug trafficking.

Rather than force the offshore centres to toe to their line, the industrial nations could better level the playing field by cutting their own taxes, making their government services more efficient and simplifying tax codes to make compliance easier, several Caribbean bankers said.

"The attack basically came from Germany and France, which are remnants of socialism,'' Michael Alberga, a partner in the Myers & Alberga law firm in the Cayman Islands, said.

Several bankers said the OECD, which was set up to study and analyse opportunities for financial growth, had overstepped its bounds by pursuing "punitive and compulsory'' policies.

"Why is tax competition harmful to the OECD?'' said George Salis, international counsel and economist in Belize for the offshore services firm Butterfield, Reimer & Associates. "Regionally, all these nations must stand up and assert their own sovereignty.'' The bankers said it was hypocritical for the OECD to single them out when two of its members -- banking centers Luxembourg and Switzerland -- refused to fully endorse the tax haven initiatives.

The OECD is not alone in pressuring the Caribbean offshore havens. The British government in March issued a White Paper calling for the end of offshore tax havens among its dependent territories.

The European Union is also pushing for the elimination of tax havens, even though it has so far been unable to agree on a uniform tax policy on earnings from capital among its member countries.

It also rankles that the EU is pressuring offshore centers to change their tax laws while it claims to oppose extraterritorial laws. The EU, for example, has been a frequent critic of the US Helms-Burton Act, which calls for US sanctions on foreign firms dealing in expropriated Cuban properties formerly owned by US citizens.

Caribbean islanders say their banks also are unfairly portrayed as havens for money laundering, despite a spate of new laws and mutual assistance treaties aimed at keeping the industry clean.

"All the money that has been laundered in the Caribbean comes from G-7 countries,'' Alberga said. "Our efforts are bigger than theirs.'' But the Caribbean islands' small size makes them vulnerable to international pressure, imposing a burden to be "cleaner than Caesar's wife,'' said Trevor Carmichael, a principal with the Chancery Chambers law firm in Barbados.

"We have to make sure we're scrupulously clean because we're smaller. And because we're smaller we can be blacklisted,'' he said.

Map Michael Murphy