When they meet in Seoul in South Korea this month, finance ministers of the G20 nations are set to confirm that they will impose economic sanctions on developing nations that have failed to comply with the OECD's initiative on information sharing agreements.
Countries such as Guatemala, Belize, Costa Rica, and Panama could be penalised with sanctions because they have not yet signed 12 international tax information-exchange agreements (TIEA) as OECD requires.
The OECD has been dealing with the issue of unlawful tax havens for 10 years. In the last four years it has published reports on the transparency practices of more 80 countries.
"If countries are going to impose sanctions, they are likely to rely on the progress reports to see which jurisdictions have substantially implemented OECD standards," said Grace Perez-Navarro, deputy director for the OECD's centre for tax policy and administration.
All of the countries facing sanctions have different circumstances and are making varying degrees of progress towards abiding by information-sharing protocols.
Belize is now actively engaged in negotiating agreements, but has so far only signed a quarter of the minimum 12 required.
Panama has announced that it is negotiating TIEAs with other jurisdictions. It has concluded talks successfully with Mexico and Italy.
On the other hand, Panama is also insisting on entering into agreements to avoid double taxation. Many countries think that signing a double tax treaty should take precedence over the exchange of tax information.
Guatemala faces challenging legislative issues regarding the constitutionality of these treaties, while Costa Rica has to overcome a paralysing lack of resources, such as the dearth of negotiators to represent the country.
Although all these countries have fallen short of OECD requirements, political make imposing sanctions difficult. Those developed countries that have already signed agreements with some of these delinquent nations will have little incentive to endorse sanctions when they have already received the benefit of a TIEA themselves.
G20 nations have threatened sanctions before, but their decision has been continually postponed. The possibility of punishments actually being meted out after this meaning is certainly increased because of the global political climate.
"There is heightened political attention on the issue of tax havens," said Perez-Navarro. "It is a rare thing that this issue has had such attention from world leaders in both developing and developed countries, since both groups are being harmed by a lack of transparency."
Even as countries are rushing to become compliant with OECD protocol, their leaders are expressing frustration with the way that developed countries have treated them.
Dean Barrow, the prime minister of Belize, has publicly stated that he is unhappy with OECD nations that he views as forcing Belize's hand.
"The OECD countries which are pressuring you to sign these agreements do not say 'look we have a list of our members lined up for you, here is the model of our agreement; you are willing to sign we will get members'," he said. "No, no, no. They tell you sign and if you do not you will be sanctioned. But in order for you to sign you must go out there and beg people to give you a chance. It is horribly unfair."
Perez-Navarro said she was surprised to hear of the criticism.
"From the launch of this project, the OECD has been working assist countries and promote administrative assistance," she said.
She cited the OECD's creation of a model agreement in 2002.
"We developed this model agreement to show countries the legal and administrative issues involved with these agreements. We also provide workshops and training courses in different countries to show how the TIEAs work."
"Our doors have always been open," she said.
