The regional programme for the three Baltic countries is one of the most successful modules of the OECD tax programme. It was launched in December 1995 as a joint initiative of the OECD and the Scandinavian countries. The first programme module ran for three years. It was designed to help the Baltic countries move towards self-sufficiency in tax system development by building upon the achievements of the multilateral tax centre programme and bilateral tax assistance programmes.
The first stage of the Baltic programme consisted of three programme elements:
Organisation of specialised experience-sharing seminars
While considerable progress was made in tax reform in Estonia and latterly Latvia (and to a lesser extent in Lithuania) in the years 1991-1995, tax laws remained incomplete, staff in the Ministries of Finance and tax administration relatively inexperienced and more sophisticated aspects of tax systems in the market are often unknown. The OECD programme was developed to provide training in specialised areas where there is little if any literature that would help countries to gain experience. The programme therefore touched on such issues as:
- international tax avoidance
- taxation of pensions and pension funds
- taxation of financial institutions.
Experience-sharing among the Baltic countries
The three countries face similar problems. However they are not at the same stage of development in all areas of the tax system. All three countries have therefore benefited from discussing what solutions have worked and what have not, with the help of expert commentary from OECD countries. A number of experience-sharing workshops were organised on such topics as:
- taxation of real property
- auditing of banks and insurance companies
- international tax avoidance
- combating corruption in the tax administration.
Establishing national tax training programmes
National tax training programmes should be established in all three Baltic countries. As a result of its multilateral and in-country training programmes, the OECD has developed a substantial number of courses that can form the basis of a national tax training school curriculum . The eventual goal is for the countries to assume all of their training needs. A joint programme with the Baltic countries in this area also helped to promote the networking between those responsible for training in the three countries, and the exchange of ideas and course materials. The programme assisted the countries in:
improving the quality of training material: several workshops on course design and course development techniques were organised with the participation of experienced instructors from Western European, Canadian and US tax training institutions;
developing course material for a number of essential training courses for the tax administrations: course material was developed for courses on principles of tax administration, on corporate income tax and on personal income tax;
improving the delivery of training: workshops on instructional techniques were organised with the objective to assist the three Baltic countries in conducting their own Train-the-Trainers courses.
The three Baltic countries are continuing their efforts to reform their tax systems and tax administrations at remarkable speed. The initial process of establishing national training plans and programmes has been completed successfully. Tax administration has been restructured and tax laws are much more sophisticated than they were a few years ago. One of the major challenges for the three countries is to counter the danger of major revenue losses through cross-border tax evasion and tax avoidance schemes. Also, the Baltic countries are faced with the international problem of harmful tax competition, and tax policy assistance is needed to avert these countries reacting to this pressure by making themselves tax havens.
To consolidate the results achieved up to now and to help the Baltic countries in finalising their tax reforms the following elements will be included in future programmes:
Supporting further tax reform
A number of important projects are being prepared in all three Baltic countries to revise and improve tax legislation. OECD assistance has been specifically requested in the following areas:
Legislation to reduce possibilities for international tax avoidance is still incomplete and all three countries suffer considerable revenue losses through the use of avoidance schemes by both foreign investors and resident taxpayers. Experience from OECD countries in the drafting and application of anti-avoidance rules will be shared with tax policy experts and tax administrators from the Baltic countries. Special drafting assistance will also be given.
Many of the issues currently discussed among OECD Member countries and in the subsidiary expert groups of the OECD Fiscal Affairs Committee are of vital interest to the Baltic countries. The programme offers the possibility for tax policy experts from the Baltic countries to gain access to OECD work in areas such as tax competition, taxation and electronic commerce, or bribery. In addition, specific questions relating to tax treaties and transfer pricing will be discussed.
All three Baltic countries have started to introduce property taxation based on market values. Estonia has already implemented a market-value based tax on land and is now moving towards taxation of buildings. Latvia and Lithuania have prepared draft laws and are now working on the improvement of the valuation process. The OECD has assisted all three countries in the development of property tax systems and the continuation of this assistance has been requested by the Ministries of Finance and National Land Boards in the countries.
Improving the efficiency of tax administration
The tax administration in all three Baltic countries has been under heavy governmental pressure to improve collection results and reduce tax evasion and avoidance. Selected specialised workshops will be offered to assist the Baltic countries. The workshops will concentrate on areas where the OECD has specific experience and developed guidelines and workshop material, or where the presentation of experience from different OECD countries is particularly useful and important. Such areas include:
Auditing multinational enterprises
Application of tax treaties
Exchange of information