The Organisation for Economic Development & Cooperation (OECD) has shrugged off criticism of its "harmful tax'' initiative from a committee it helped set up.

But in clarifying its goals, the OECD has reconfirmed that a country's low tax rate would not, of itself, be grounds for inclusion on the short list of "tax havens'' the organisation is drawing up.

The confirmation may offer Bermuda a way off the list of "tax havens'' to be named next May, providing the OECD accepts certain conclusions and arguments put forward by Bermuda in its representations earlier this year.

Last month, the Business and Industry Advisory Committee (BIAC), which represents the views of the private sector, slammed the OECD's "harmful tax'' initiative as "ill-conceived'' and accused the OECD of not consulting with it before issuing its original, longer list of tax offenders, a list Bermuda was believed to be on.

The OECD this weekend made available to The Royal Gazette a statement from its chair in response to the BIAC's charges, following a meeting between the two organisations.

"We are optimistic that, with a clearer understanding of the Forum's work, the international business community will be able to endorse the OECD's efforts to combat harmful tax practices,'' said the OECD report.

The OECD denied it was interested in the elimination of all tax competition, a demand it has never openly stated, but which BIAC saw as the logical conclusion of the OECD initiative.

"Low, no or only nominal taxation is used as a sign that there may be harmful tax competition,'' said the OECD this week.

"One or more of the other three criteria, which might be called the operative criteria, would normally be present where tax competition is harmful.

"These operative criteria are: lack of effective exchange of information, lack of transparency, and ring-fencing, or a lack of substantial activities.'' The OECD report continued: "If none of these criteria are present, a low/no/nominal tax rate would not be considered harmful in itself under the OECD Report, and so could not lead to a jurisdiction being listed as a tax haven or to a regime being labelled as a harmful preferential regime.'' These three criteria, like beauty, are in the eye of the beholder.

Bermuda would almost certainly be able to argue, following legislative changes introduced earlier this year, that it meets the `exchange of criteria' test.

Then, too, Bermuda could argue that its international business activities are entirely "transparent''. The "know your customer'' rule might be put forward against the idea of "ring-fencing''.

Were the OECD to accept these arguments, Bermuda would come off the final list. Finance Minister Eugene Cox has told Bermudians that the OECD initiative need not cause undue concern.

In a final shot, interpreted by observers as being aimed across Switzerland's bows, the OECD report concluded: "A question has also been raised as regards the scope of our tax haven work.

"We would like to take this opportunity to clarify that both independent states and dependent territories are being examined, with equal intensity, in our work to develop a tax haven list.

"Further, the co-ordinated counteracting measures envisioned in the report would be applied with equal force to any jurisdiction that does not act to eliminate the harmful aspects of tax practices, be they Member countries or non-member economies, independent states or dependent territories.'' BUSINESS BUC