U.S. and OECD Inch Toward Tax Haven Deal

During an intensive 11- 13 June meeting in Paris, the United States and the OECD appeared to inch closer toward an agreement on the multinational organization's highly controversial plan to end so-called harmful tax competition

It appears that despite fierce lobbying efforts by those who oppose the move, the United States has decided to stick it out and continue negotiations with the OECD.

"The U.S. reiterated our position about refocusing the project solely on the need for appropriate information exchange in order to prevent tax evasion," U.S. Treasury Department spokeswoman Tara Bradshaw told Tax Analysts on 14 June. "We also repeated our concern about singling out so-called tax havens for special treatments." She added that the U.S. government will continue to hold discussions with the OECD over the next coming months. Barbara Angus, the international tax counsel for the U.S. Treasury, and colleague Rocco Femia represented the U.S. government at the "Harmful Tax Forum" held between the 30 major industrialized OECD nations. (For prior coverage, see 2001 WTD 113-9 (Document link: Database 'Worldwide Tax Daily', View '(Number'), or Doc 2001-16325 (13 original pages).)

The U.S. government's willingness to work with the OECD leadership and the European member countries' attempts to find a commonly accepted solution have emboldened OECD leaders to continue on with the project.

With their backs to the wall, it is now believed that OECD members are willing to soften the threat by extending the deadline until 2003 or even later.

Daniel Mitchell, an economist with the Heritage Foundation, and co-founder of the Center for Freedom and Prosperity, a Washington- based lobbying outfit, released a statement on 11 June saying the so- called harmful tax competition phase of their battle with the OECD is over. "'Information exchange' is phase two of the battle, and this refers to setting the conditions under which it is legitimate for governments to suspend financial privacy and divulge confidential information to other governments," he said.

Those who favor tax competition and financial privacy usually believe information exchange is a good and fair practice when governments genuinely seek to cooperate in the fight against criminal activity; governments respect due process legal protections when seeking information; and governments implement appropriate safeguards to protect information from disclosure, he said. Information exchange tramples individual countries' sovereignty, however, when governments try to enforce their tax laws on an extra-territorial basis; governments engage in "fishing expeditions" that violate protections against unreasonable search and seizure; and governments ignore the "dual criminality principle" and don't respect each jurisdiction's sovereign right to determine what is a crime, he said. He added that his organizations will continue to lobby the U.S. Bush administration to ensure it understands the proper role of information exchange.

Source: Cordia Scott, "U.S. and OECD Inch Toward Tax Haven Deal," Worldwide Tax Daily, June 14, 2001, http://www.tax.org/

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