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“ Although the report recognizes that it is essential that each state has sovereignty

over its tax system and that levels of taxation can differ from one state to another,

however, the same report presents the fact that tax rates are lower in one country

than in another as a criterion to identifying harmful preferential tax regimes. This

results in unacceptable protection of countries with high levels of taxation, which

is moreover, contrary to the economic philosophy of the OECD.”

The Swiss concluded “it is legitimate and necessary to protect the confidentiality of

personal data. In this respect, the Report and Recommendations are in certain aspects in

conflict with the Swiss legal system.”122 Switzerland was also of the view that at present

the international judicial assistance that is presently in effect has had enormous positive

effects in combating tax fraud and that the system of withholding tax (the rate of which is

the highest among OECD countries) aims to prevent tax avoidance123. As a result of both

of the above statements to the OECD the main efforts to reduce so called Harmful Tax

Competition has been the targeting of smaller states such as The Bahamas, Aruba,

Barbados, Seychelles, Mauritius and dependent territories such as Cayman Islands and

Bermuda.

On June 22, 2000 the Financial Action Task Force which was formed by a G-7 initiative

at the Paris Summit 1989 and is working in collaboration with the OECD on reducing

Harmful Tax Competition, listed the following countries as having serious systematic

122

Id at page 76

123

Id at page 77

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