The first factor along with any one of the other three, would make a tax regime harmful. The report does not however suggest any floor level below which the tax rates would be termedharmful.

It is claimed that the recommendations made in the report would encourage countries to refrain from adopting measures constituting harmful tax practices. A multilateral forum is suggested to make concerted efforts in this direction, Members are urged not to have any economic or political ties with tax havens that could promote harmful tax practices, and to encourage greater coordination among countries to share information in areas such as banking practices, assistance in recovery of tax claims of foriegn countries etc. Some of the other recommendations include, amendment of existing treaties to ensure that no treaty benefit is used for tax avoidance; introduction in the domestic legislation of member countries, rules such as those governing Controlled Foreign Corporations, enabling clubbing of income of offshore subsidiaries to that of the parent company.

A deeper study of the report reveals a strong bias in favour of developed countries. To start with, the very premise on which the reportproceeds is questionable. Competition between tax regimes or lowering of tax rates cannot be called a harmful development. Doing so mitigates against the very concept of free markets so forcefully advocated by the developed world. The low or high rates of taxation have to be seen in the light of a country's economic needs or its long term fiscal policy. It is an engine to give direction to the development of national economies and to serve the best interests of a country. Calling low tax rates as harmful is some what odd, specially when most OECD countries were, in the past, preaching the virtues of low tax rates to the developing world. That was perhaps when such a policy was favourable to their business interests. Besides, tax on incomes is just one of the many variables that drive the free market economy. There are many other harmful practices in international trade, but there is no multilateral approach to curb them.

A degree of competition in tax matters can produce many desirable consequences. Itleads to tax reforms, like, rationalisation of tax structures, simplification of tax laws and procedures, making tax administration more responsive, and minimising contact between the tax payers and tax administrators. Each of these factors impinges upon the tax rates. Any harmful effect of such competition to a particular country or a group of countries can only be a side effect. Even the OECD report recognise this, and yet recommends restricting tax competition without identiffying when its side effects overshadow the other main desirable effects, or when the competition becomes universally harmful. After all low tax rates, while adversely affecting some countries, would benefit others.

Some of these recommendations, by their very nature, are in conflict with the economic interests of countries that make tax attraction the foundation of their economies. While the report expects such countries to eliminate measures constituting harmful tax practices, it suggests no incentives for countries that will suffera financial loss by associating themselves with the proposed regulations. On the contrary. It seems to suggest formation of a pressure group in the form of a multilateral body, comprising predominantly of the economic superpowers. To force tax havens into submission by subjecting them to economic isolation appears to be the hidden agenda. What has been lost sight of is that any such move could reinforce the attraction of offshore centres, which by itself could imply "harmful" consequences.

Recommendations on sharing of information could also be in direct conflict with the legal systems of some countries. Luxembourg and Switzerland have already expressed dissent by abstaining in Council on the approval of the report. They feel that the report is partial and unbalanced and its purpose is not so much to counter harmful tax practices as to abolish bank secrecy. Switzerland rightly feels that its recommendations in part, are in conflict with the Swiss legal system.

Finally, financial and investment decisionsdepend not just on tax levies, but on a multiplicity of economic, political or social factors. The report recognises this and yet does not take other non tax factors into account. This one track approach suggests that achieving fair competition for economic activity is only a facade. Behind the veil is the intention to further the interest of developed countries, that are typically characterised by high tax regimes. They see this new development as a threat to their economies, because it has the potential to reverse the flow of wealth across the globe, and for once, away from the developed nations. Any multilateral move to universally restrict competition betweem tax regimes needs closer scrutiny. None of the fears allayed in the OECD report seem to justify a multilateral effort at eliminating competition in tax matters. Tax havens are typically small countries that have nothing but tax concessions to offer to attract foreign investments. Without such measures their economies could witness a completecollapse. Providing tax relief to offshore investment is a decision they have taken in exercise of their sovereign right to determine their economic policy. India would do well to guard against any move that threatens to take away the right of a nation to formulate its own economic agenda. In case a country feels threatened by any particular tax regime, it should attempt to solve the problem bilaterally, by amending its treaty provisions with such a country, or unilaterally, by changing its own domestic laws to curb tax avoidance. A harmony between the global approach of today's business, on the one hand, and the national approach of tax authorities, on the other, is necessary to solve such issues.

With its growing emphasis on IT development, India has the requisite infrastructure and expertise to comprehend these new challenges created by the communications revolution. It is time for India to engage itself actively in such deliberations and to set standards for the developing world. It must use its vasthuman resources to take lead and play a constructive role in evolving policies that cater to the interest of both the developed and developing countries, equally and objectively.