OECD Explained

Lisa Smith, BA (Hons), CeFA
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The Organisation of Economic Co-Operation and Development (OECD) is a forum for the governments of 37 developed countries to discuss economic and social policies.

The OECD is a ‘think-tank’ for researching and considering the impact of new ideas.

Lately, the OECD has put together two tax strategies:

  • The Common Reporting Standard (CRS) – a network of governments that swaps data on taxpayers with offshore accounts and investments
  • Base Erosion and Profit Shifting (BEPS) – a collaboration of countries closing tax rule loopholes exploited by companies to ensure multinational businesses pay their fair share of tax

What Is The OECD?

The OECD was formed in 1948 as the Organisation for European Economic Co-operation (OEEC). The aim of the OEEC was to monitor how money from the US Marshall Plan was spent to reconstruct Europe after the Second World War.

By the late 1950s, the Marshall Plan was ending, but world leaders believed the OEEC could regenerate into a global body to support trade and friendship between the leading economies.

The OECD came into being on September 30, 1961 with 19 member countries.

Over the years, membership has expanded, with Colombia the most recent addition in 2020.

The OECD website is www.oecd.org

Countries Of The OECD

One of the terms of membership is OECD countries must run a free-market economy.

This excludes some of the world’s largest economies, such as China and Russia.

The current membership of the OECD is:

  • Australia
  • Austria
  • Belgium
  • Canada
  • Chile
  • Colombia
  • Czech Republic
  • Denmark
  • Estonia
  • Finland
  • France
  • Germany
  • Greece
  • Hungary
  • Iceland
  • Ireland
  • Israel
  • Italy
  • Japan
  • Latvia
  • Lithuania
  • Luxembourg
  • Mexico
  • Netherlands
  • New Zealand
  • Norway
  • Poland
  • Portugal
  • Slovak Republic
  • Slovenia
  • South Korea
  • Spain
  • Sweden
  • Switzerland
  • Turkey
  • United Kingdom
  • United States

Costa Rica is listed as the next country to join the OECD ranks. A formal invitation to join was issued in May 2020. Costa Rica has successfully passed assessment by 22 OECD committees while reforming laws and standards to meet the think-tank’s requirements.

Other countries waiting in the wings to join are Brazil, Indonesia, India, and South Africa.

The European Commission has a close relationship with the OECD, but cannot vote on policy, while China is not a member but a ‘key partner’.

OECD member countries account for two-thirds of the world’s economic output (GDP), three-quarters of world trade, half of the world’s energy consumption and 18% of the global population.

To keep up with the latest news, insights and policies, the OECD publishes the free OECD Observer magazine.

OECD Tax Blacklist

One of the most publicised jobs of the OECD is to keep a register of countries considered tax havens, or as the OECD puts it ‘uncooperative jurisdictions’.

A project looking at tax avoidance concluded these countries were aiding wealthy individuals and businesses to avoid between $100 and $240 billion in tax every year.

The Common Reporting Standard (CRS) and BEPS arose from the project as an attempt to stop international tax avoidance.

Currently, no countries are on the tax blacklist.

Mapping A Better Life

An online app compares well-being data on 11 topics across countries to see how your enjoyment of life rates with someone living elsewhere.

Expat destinations Australia and Canada rate highly for most indicators – but not that much better than the UK.

Denmark, Finland, Iceland, Norway, and Switzerland rate highest, while Greece, Portugal, and Turkey rank at the foot of the life satisfaction table.

How The OECD Makes Decisions

The OECD has more than 300 committees, experts and working groups that sift data to devise policies that are taken up by member countries.

The organisation structure is like that of a government, with departments coving education, finance, trade, the environment, and the like.

Around 40,000 staff and committee members from member governments, universities, business, and other bodies take part in the decision making.

The committees are run by a secretariat of 3,300 civil servants under the leadership of a Secretary-General.

The current post-holder is Angel Gurría.

The OECD is based in Paris, France, and has offices in Berlin, Mexico, Tokyo, and Washington DC.

Policy Shift May Make OECD Redundant

The OECD recognises that a major shift in the global economy is underway, moving economic power away from the traditional first world developed countries as rapid globalisation continues.

The think-tank is already looking 50 years ahead to look at how to change the way it works to help more countries.

OECD FAQs

Here are some answers to common questions about the OECD:

Who is in charge of the OECD?

The OECD is an NGO or non-governmental organisation run by more than 3,000 staff headed by Secretary General Angel Gurria.

Why is the OECD needed?

The OECD researches and drafts policies for member governments. As a non-political forum, the policies and their effects are discussed to make sure they work.

Where is the OECD based?

The OECD head office is in Paris.

What is the tax blacklist?

The tax blacklist is a list of just six countries – or tax havens – that are considered uncooperative and secretive with other countries in tax matters.

How many countries are in the OECD?

The OECD has 37 members and is expanding soon to take in five more, taking the number of members up to 42.

Why isn’t China in the OECD?

China is not in the OECD but is considered a ‘key partner’ despite having the world’s second largest economy because the government manages how the economy works rather than leaving the job to free market forces.

How does a country join the OECD?

Size does not matter – many of the current OECD members are among the world’s smallest nations. It seems political freedom is not that relevant either, as Saudi Arabia and Turkey are members despite tarnished human rights records. To join, countries must show they have a free market economy with no government controls.

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