The Taxmen's Union
CIESLA, EILEEN
The Taxmen's Union The worlds high-tax governments pledge solidarity forever BY EILEEN CIESLA Last June, the 30 industrialized nations that make up the Organization for Economic Cooperation and...
...In spite of the legal and diplomatic difficulties, the OECD says it will hew to the July deadline...
...Today the havens present a real— and growing—check on high tax governments...
...Silly us, we thought freeing capital from restrictions of national governments was what made it a global economy...
...Despite claims that the intent is simply to expose illegal activity, the clear purpose of the blacklist is to make it easier for OECD states to keep their own taxes too high...
...So far the U.S...
...If successful, it would "destroy the competitive pressure to keep tax rates down...
...Certain aspects of these efforts are under review by the new Administration," O'Neill said in February...
...It is not our job to tell other countries to dismantle their financial privacy laws," he wrote...
...role is crucial," says Dan Mitchell...
...Alter your financial privacy laws and stop preferential tax treatment for foreigners by July 31, they were told, or face sanctions from member states...
...Developed countries would refuse to enter into income tax agreements with tax havens, increase auditing of offshore accounts, and put levies on certain transactions...
...The point is well made...
...The Clinton Administration of course supported the crackdown, with former Treasury Secretary Larry Summers pontificating all the way about the dangers to the global economy of "improper tax avoidance and distort[ed] capital flow...
...In a February letter to O'Neill, Owens wrote: "For the industrialized world to suddenly threaten severe penalties on these nations because they now are becoming effective competitors is both morally objectionable and economically misguided...
...Peeling back the tax havens' privacy veil, says Mitchell, "is a move towards a worldwide system of taxation based on 'information exchange.' That's a system where all countries agree to eliminate financial privacy so their governments can go on fishing expeditions for more revenue...
...As trade lawyer Mark Warner with Hughes Hubbard & Reed points out, "Unless the OECD comes up with a tax haven list that includes Switzerland and Luxembourg, you may have a case of discrimination under the World Trade Organization's Most Favored Nation rules...
...This is really a means of grabbing more revenue for high-tax European nations," explains the Heritage Foundation's Dan Mitchell...
...But negotiations between the remaining havens and the OECD have made little progress...
...And last September, in a letter to Summers, Majority Leader Armey ridiculed the claim that the OECD was after only specific illegal activity...
...When a person is living in a country, benefiting from these services and not paying their fair share of taxes, it puts an unfair burden on those who do...
...Democracies need governments and governments need to levy taxes in order to provide services," says Bray...
...The U.S...
...position has not changed, though Secretary O'Neill sounds apologetic about it, at least compared to his gung-ho predecessor...
...So far the Bush administration shows little inclination to alter the U.S...
...The number of such funds has skyrocketed, from 450 in 1986 to 6,000 in 1998...
...Whether it backs the OECD or tell it to back off will be an important test...
...We should seek cooperation in cases of specific wrongdoing, but that does not require wholesale destruction of personal privacy...
...Six of the tax havens caved to the OECD pressure right away: Bermuda, the Cayman Islands, Cyprus, Malta, Mauritius, and San Marino...
...The Taxmen's Union The worlds high-tax governments pledge solidarity forever BY EILEEN CIESLA Last June, the 30 industrialized nations that make up the Organization for Economic Cooperation and Development (OECD) blacklisted 41 tax havens, mostly small islands and principalities from the Bahamas and Bahrain, to Liberia, Liechtenstein, and the United States Virgin Islands...
...They entirely cut off all banking relations with the target nations, making it virtually impossible to do business...
...Spokesman Nicholas Bray denies the OECD is trying to tell any country how to set its tax rates, saying tax cheats are its only goal...
...Neither perspicacious nor promising...
...Or it sends a signal to high tax governments to back off, helping all taxpayers...
...But the OECD claims that over $1 trillion is invested in offshore funds...
...Tax havens and taxpayers do have some allies in Congress, including Rep...
...Some U.S...
...If we don't impose sanctions, it doesn't matter if France imposes protectionism, because that would just mean more business for U.S...
...The sanctions are more Draconian than anything imposed on genocidal countries," argues David Burton, a partner with the Argus Group, a law and government-relations firm...
...Does the Bush Administration grasp that downward pressure on global tax rates is crucial to hopes of sustaining New Economy growth rates of four or five percent in the U.S...
...Several of the OECD nations would qualify for their own blacklist, which requires meeting but one of several criteria: that a nation lack "transparency" in its accounting, or have little exchange of information with foreign tax authorities, or attract foreign investment with no substantial domestic activity...
...THE AMERICAN SPECTATOR ¦ April 2001 15 Antilles agreed to cooperate on the condition that the U.S., Switzerland, and Luxembourg enact the same reforms...
...Major Robert Owens (D-NY), and Assistant Senate Majority Leader Don Nickles (R-Okla...
...Though the OECD itself cannot impose sanctions, the penalties it recommends to member states would be stiff...
...The Isle of Man and the Netherlands "If I were beached, could I do this...
...Globalization and the Internet have made it easier for investors to move their assets into offshore tax shelters...
...institutions...
...tax practices and preferences certainly fit the tax-haven description, including tax-free foreign deposits...
...position supporting the blacklist or to extend the deadline...
...Nonetheless, he praised "the priority placed on transparency and cooperation to facilitate effective tax information exchange," and accepted the OECD claim that crackdown sanctions were "not about dictating to any country what should be the appropriate level of tax rates...
...Some of the sanctions may violate international trade law...
...Sam Johnson (R-Texas), Rep...
Vol. 34 • April 2001 • No. 3
