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 P.O. Box 10882
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Bureau of National Affairs

No. 154
Friday August 10, 2001
Page G-4
ISSN 1523-567X
Tax, Budget & Accounting

Taxpayer Privacy:
U.S., OECD Efforts for Information Exchange
Endanger Financial Privacy, Say IPA Panelists

Panelists at the International Platform Association Aug. 9 criticized the United States and the Organization for Economic Cooperation and Development for attempting to implement antitax avoidance programs they said would endanger the financial privacy of individuals and the fiscal solvency of the international trade market.

The panelists raised a number of questions about the Internal Revenue Service's qualified intermediary regime to obtain U.S. taxpayer income data from foreign financial institutions and about the impact OECD's anti-tax haven initiative and its plan to implement an information exchange system in association with that effort.

According to Bruce Zagaris of Berliner, Corcoran & Rowe, the terms of the IRS qualified intermediary program do not obligate financial institutions to notify account holders that their financial records are being shared with other entities or are suspect in investigations.

This changes the commonly held practice that an individual is innocent until proven guilty, said Fred Smith of the Competitive Enterprise Institute. "Under money laundering laws, everyone is guilty," he added.

It denies individuals the knowledge that their financial transactions are being monitored, it denies them the opportunity to offer objections, and places them at greater risk for political persecution or extortion, Zagaris added.

OECD Pressure on Developing Nations

Several panelists noted concern about the United Nations-OECD effort to eliminate the perceived harmful tax practices of countries offering preferential tax treatment to foreign investors.

Gilbert Morris of the Security Policy Group International said that financial institutions in developing nations like the Bahamas have been known to freeze access to individual accounts on mere suspicion of criminal activity, even in the absence of a trial decision.

Andrew Quinlan of the Center for Freedom and Prosperity said there is a larger reason why the largest and most affluent nations are targeting mostly Caribbean island nations, with little impact in the international market, as tax havens.

According to Morris and Anton Keller of the Swiss Investors Protection Association, a fundamental shift is occurring in the labor pools of the largest nations, so they are responding by implementing programs that would enable countries to tax individuals on money earned outside their jurisdictions.

The ability to tax across borders removes the countries' accountability for their actions and endangers taxpayers' ability to influence their governments, Keller said. Individuals could be forced to pay taxes to their birth countries for the rest of their lives, making them slave to those systems, Keller said.

By Myrna Zelaya-Quesada

Copyright © 2001 by The Bureau of National Affairs, Inc., Washington D.C.


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