No. 08
Friday January 11, 2002 Page G-1
ISSN 1523-567X
Tax, Budget & Accounting

Tax Treaties
Crane Questions Treasury's Support
Of Information Exchange Agreements

House Ways and Means Trade Subcommittee Chairman Philip M. Crane (R-Ill.) asked Treasury Secretary Paul O'Neill Jan. 9 to explain the administration's position concerning financial information exchange agreements with other nations.

The letter questioned whether implementation of the program, which receives support by the Organization for Economic Cooperation and Development and the European Union, might be detrimental to the U.S. tax system and individual taxpayers.

The United States has tax information exchange relationships with more than 70 countries through an extensive network of agreements and tax treaties.

In 2002, the United States signed two information exchange agreements with the Cayman Islands and Antigua and Barbuda--countries the OECD once identified as tax havens (227 DTR G-4, L-7, 11/28/01; 234 DTR G-7, TaxCore, 12/7/01). Most recently, the Treasury Department announced ongoing negotiations with Panama for a forthcoming agreement (6 DTR G-4, 1/9/01).

"Our information exchange relationships are important to the full and fair enforcement of the U.S. tax laws by allowing for critical information to be obtained upon specific request in cases where there is reason to believe that a taxpayer has not paid taxes that are due and owing," Treasury said Jan. 8 in announcing talks with Panama.

Crane, however, said he hopes O'Neill will oppose the initiative for being a "global network of tax police" that assaults financial privacy and fiscal sovereignty.

Crane Seeks Answers

The letter also included a set of questions for Treasury:

1. Has any study indicated how much foreign investment may be withdrawn from U.S. banks if the United States participates in information exchange agreements with other countries?
    
2.  Has the department ascertained whether such policies would violate international trade agreements?
    
3.  Can Treasury guarantee that the United States would not be compelled to collect data for foreign tax collectors that would not be needed for U.S. tax purposes?
    
4.  Would participation in the program compel state governments to change their tax laws?
    
5.  Have the human rights and personal safety implications of the initiative been assessed? and
    
6.  What is the economic impact the program would have on U.S. allies in the Caribbean?

Text of Crane's letter is in BNA TaxCore.

By Myrna Zelaya-Quesada

Copyright © 2002 by The Bureau of National Affairs, Inc., Washington D.C.

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