To Join the International Tax Cartel or Not? How Should Asia Respond to the OECD's Harmful Tax Regimes Project?

Currently there is an international trend towards a lowering of effective tax rates. Low tax regimes have been driven by globalisation as countries have become more aggressive in competing for foreign investment. Often countries resort to providing tax concessions that might encourage such investment. Multinationals and wealthy individuals can take advantage of these regimes to reduce the tax they would otherwise pay in their country of residence. This has threatened the revenue base of the high spending developed nations. International bodies representing the developed nations, such as the OECD and IMF, have responded with projects to rid the world of so-called harmful tax practices. The OECD's project has implications for all Asian nations but, in particular, Hong Kong and Singapore. Nevertheless, so far Asia has been sidelined by the project. However the evidence would suggest that for the OECD to succeed it must now turn its attention towards Asia. What might be the appropriate response for Asia? Should it embrace the demands of the Western developed nations and adopt compliant regimes or compete with these nations through its tax regimes? Another option might be to seek to harmonise tax regimes within the region to the extent of establishing a regional protocol on unacceptable tax practices and to present as a regional block. The appropriate response is both a vexed and significant question