New York 19 March 2001

House Majority Leader Writes Again
To Paul O'Neill Against OECD

by Mike Godfrey

     Representative Dick Armey, House Majority Leader, who was the first of eight Congressmen to write to Treasury Secretary Paul O'Neill urging him to reverse administration co-operation with the OECD's harmful tax initiative, has written again, as rumours emanate from the Treasury that staffers are fighting back against the Secretary's liberal inclinations.

     'Recent reports indicate that you are wisely re-evaluating the United States involvement in the OECD's 'harmful tax competition' initiative,' writes Mr Armey. 'This project, which was supported by the Clinton administration, is fatally flawed and contrary to America's national interests.'

     The Congressman warns that career personnel, who try to limit tax evasion, are misguided. 'A global network of tax police is the wrong approach,' he says.

     Mr Armey recommends a switch to a territorial basis of taxation by all OECD members (ie that states should tax only income arising in or remitted to their territory). Very few OECD nations use this system, which means that double tax treaties are mostly redundant, but would create intense competition between states, especially if it weere applied to corporations as well as to individuals.

     'Economic growth would be enhanced,' writes Mr Armey, 'because a territorial tax system and proper tax treatment of savcings and investment would stimulate business activity here at home and attract investment from overseas.'

     The letter warns that the OECD's initiative, if it were successful, would be counter-productive and far from reducing money-laundering, one of its supposed aims, would tend to increase it, as small 'persecuted' nations would turn to desperate measures to rescue their damaged economies.

     'By every possible criterion,' finishes the Congressman, 'the OECD's effort is misguided. It is designed, in effect, to create a tax cartel for the benefit of a small cartel of high-tax nations. These countries are seeking to impede the flow of global capital, and the US economy, with its comparatively attractive tax system, will suffer if they succeed.'

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