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Washington 26 February 2001

Is The US Treasury Department Poised
To Distance Itself From OECD Blacklist?

by Mike Godfrey,

     It seems that Treasury Secretary Paul O'Neill's carefully balanced remarks made after the Palermo G7 summit on the subject of the OECD's 'unfair tax competition' initiative reflect a lively debate within the Treasury Department on the wisdom of continuing to support all aspects of the OECD's campaign.

     As is the case with most national revenue-raising authorities, the permanent officials in the Treasury Dept are 'slash-and-burn' taxation junkies, and are fully on board the OECD's fiscal juggernaut. During the Democrat administration which has just ended, they and their political masters shared the same agenda - but now they face an anti-tax right-wing administration, and they will not find it so easy to continue with international policies designed to protect the tax base in rich countries through a program of what has been called 'fiscal colonialism' aimed at discomfiting the offshore tax havens.

     In internal discussions, Treasury Secretary Paul O'Neill is said to have been sceptical about the OECD's campaign. Treasury Secretaries, especially new ones, don't always find it easy to be aware of what is going on down in the engine room, and senior Republican legislators, as well as Washington lobbyists, have been making sure that the new Secretary is well aware of what is happening in his domain through a series of letters and active press coverage.

     This effort seems to be bearing fruit: in Palermo, says the Wall Street Journal, the US warned privately that it intends to review the Clinton administration's decision to support the OECD initiative. This was reflected in Paul O'Neill's closing statement: "It is critical to clarify that this project is not about dictating to any country what should be the appropriate level of tax rates," he said.

     The jury is still out on this very pragmatic man's decision. Nobody thinks that he will be back off from international efforts to stem drug-base money-laundering, and he is thought to favour more fiscal transparency between countries. But a senior Treasury official said last week: "He will respect the sovereignty of the various tax systems -- that's very important." 

     Much of the impetus behind the efforts to change US policy on this and related issues comes from the Center for Freedom and Prosperity, a recently-formed group of conservative activists with a long history of involvement in tax reform. "We're for fiscal liberty, financial privacy, and national sovereignty," says Andrew F. Quinlan, the center's president and CEO. "We fear that if all countries have the same tax rate, the tax rates will go up because there will be no competition."

     Apart from domestic lobbying, Andrew Quinlan and and his colleague Daniel J Mitchell have been criss-crossing the globe in their attempts to encourage opposition to the OECD's attacks on offshore jurisdictions, and have been instrumental in the creation of a putative International Tax Forum which would bring together the blacklisted tax havens with members of the OECD in a grouping meant to discuss over-arching issues such as tax comeptition, rather than see multilateral groups such as the OECD impose the wishes of one particular group of states.


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