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New York 21 February 2001

Democrat Rep. Major Robert Owens
Argues For Caribbean Against OECD

by Mike Godfrey,

     In a surprising development, Democrat Representative Major Robert Owens (D - NY) has written a letter to Treasury Secretary Paul O'Neill complaining about US support for the OECD's campaign against offshore jurisdictions. Saying that "the OECD's attack on international tax competition undermines the ability of these nations to develop and/or maintain financial services industries", Major Owens asks Paul O'Neill to "re-examine American support for the OECD's anti-tax competition campaign".

     On second thoughts, this Democrat alliance with a right-wing Republican cause publicly espoused by House Majority Leader Dick Armey and Deputy Senate Majority Leader Don Nickles is not so surprising: the 63-year old African-American Major Owens has represented New York's 11th District, an area housing considerable numbers of Caribbean immigrants, since 1982. Similar logic underpinned Senator Hilary Clinton's letter-that-wasn't on the same subject to Secretary O'Neill.

     Despite the barrage of Congressional letters to the Treasury Secretary, and Paul O'Neill's appointment of a seasoned tax professional, Pam Olson, as Deputy Assistant Secretary for Tax Policy, the Treasury has issued no clear statement about its intentions towards the OECD.

     Last weekend's G7 summit in Palermo was Paul O'Neill's first opportunity to discuss the issue with his international colleagues, and in his somewhat Delphic closing statement after the summit there are words to encourage both sides in the dispute:

     "We also urged Russia to move quickly to take action against money laundering, as outlined by the Financial Action Task Force (FATF) in June 2000. Finally, we reviewed developments in our shared effort to fight financial abuse. We look forward to continued steps by identified jurisdictions to undertake needed reforms and urged the IMF and World Bank to help countries implement relevant anti-money laundering standards. At the same time, we reiterated our commitment to implement coordinated countermeasures in cases in of ongoing non-cooperation, based on recommendations by FATF. We also reaffirmed our support for efforts to address harmful tax practices. While I indicated to my colleagues that certain aspects of these efforts are under review by the new Administration, I support the priority placed on transparency and cooperation to facilitate effective tax information exchange. At the same time, it is critical to clarify that this project is not about dictating to any country what should be the appropriate level of tax rates.'

     This rather moderate line is very different from the 'slash-and-burn' rhetoric employed by his gung-ho predecessor, Larry Summers. So there is hope . . . but the fight goes on.

     Here is the full text of Major Owens' letter to Paul O'Neill:

PDF of Major Owens' Letter

February 7, 2001

The Honorable Paul H. O'Neill
U.S. Department of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220      

Dear Secretary O'Neill,

     I am very concerned about an initiative that may impose significant economic damage on many of our neighbors in the Caribbean. The Paris-based Organization for Economic Cooperation and Development, of which the United States is a member, is threatening many of these nations with financial protectionism and other economic sanctions simply because these jurisdictions have tax policies that are attractive to foreign investors.

     This is a fundamental violation of sovereignty. Perhaps more importantly, however, the OECD's attack on international tax competition undermines the ability of these nations to develop and/or maintain financial services industries. As you surely realize, the Caribbean has been subject to grave economic pressures because it is increasingly difficult for the region to prosper while relying on basic commodities such as sugar and bananas.

     If the OECD campaign against these nations causes substantial damage to their financial services industries, this will be yet another devastating blow to the region. This would cause significant economic hardship and cause poverty rates to climb even higher.

     Wealthy nations of the world should not be trying to penalize developing nations for enacting tax policies that are attractive to investors. OECD countries control the vast majority of the world's capital and have benefited for centuries from exploitative relationships with the less developed world. 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.

     I hope you will re-examine American support for the OECD's anti-tax competition campaign.

Sincerely yours,

Member of Congress


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