May 14, 2001

The Week
(Excerpt from)

     ...The Organization for Economic Cooperation and Development is running a campaign against "tax havens": i.e., countries with low taxes and strong financial-privacy laws. Critics say that it is picking on weak countries. By the OECD's standards, Ireland, Switzerland, Austria, and Singapore are tax havens-as is the United States-but its list of 41 such havens is composed mainly of small, poor countries in the Caribbean. The OECD itself is a club for industrialized nations. What concerns OECD members such as France (where the group is based) is that people are using the tax havens to evade high taxes on capital in their home countries. The OECD wants the rich countries to impose trade and financial sanctions on the havens unless they change their laws. All of this is spelled out in two OECD reports with the ominous titles Harmful Tax Competition and Towards Global Tax Cooperation. America can sink the OECD plan by not participating in it. In Congress, opposition is being led by conservatives (who rather like "tax competition") and members of the black caucus (who are defensive of the Caribbean). Treasury secretary Paul O'Neill is on the fence. He says countries should be able to set their own tax rates, but has also supported "effective tax information exchange"-i.e., governments' sharing information about taxpayers. O'Neill has a choice: Side with privacy, free trade, and fairness for poor countries, or with double taxation and the government of France. It should be easy...

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