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Tax Notes International

January 5, 2001

U.S. Congressman Questions OECD
Effort Against Tax Competition

By Robert Goulder

Copy of Letter

           U.S. Congressman Sam Johnson, R-Texas, issued a strongly worded letter to OECD Secretary General Donald Johnston January 3, questioning the basis for the multinational body's stance against harmful tax cooperation.

     "I have been following the OECD's campaign against 'harmful tax competition,' and I believe the OECD is focusing on the wrong problem," Johnson wrote. "I am certain that many of my colleagues share my concerns about the OECD focusing on 'harmful tax competition' as opposed to 'harmfully high levels of tax burdens.'"

     The letter outlines Johnson's belief that U.S. income tax rates are excessively high, but notes that U.S. taxes are low when compared to many European countries. His concern is that the international effort to eliminate tax havens will eventually cause worldwide tax rates to increase. The representative warns:

     Tax competition has been good for our country. Our comparatively less burdensome tax laws have helped the United States attract investment and entrepreneurial talent from around the world. . . . The United States will likely enact across-the-board tax relief in the near future. I am troubled by any global endeavor that could conceivably hinder the United States' ability to implement this relief.

     OECD officials have argued that their project may achieve the opposite effect, causing marginal tax rates to fall instead of rise. They point to recent tax reform legislation in France and Germany to bolster their argument. "You can bet that France and Germany wouldn't have implemented the types of tax rules they did if they weren't confident this plan would work," OECD Head of Fiscal Affairs Jeffrey Owens told the George Washington University International Tax Institute December 7. (For prior coverage, see 2000 WTD 237-1 (Document link: Database 'Worldwide Tax Daily', View '(Number') or Doc 2000-31753 (4 original pages).) The rationale has apparently failed to persuade Johnson, who continues to view the OECD program as a potential source of higher tax rates. Johnson sits on the powerful Ways and Means Committee of the House of Representatives, in which all U.S. tax legislation must originate.

     The letter makes Johnson the second member of the U.S. Congress to go on record as questioning the OECD campaign to eliminate tax havens. House Majority Leader Richard K. Armey, R-Texas, announced his opposition to the initiative in a September 8 letter to U.S. Treasury Secretary Lawrence Summers. (For prior coverage, see 2000 WTD 177-22 (Document link: Database 'Worldwide Tax Daily', View '(Number') or Doc 2000-23604 (2 original pages).)

     Documents

     The full texts of the following documents are available from Tax Analysts:

     o Letter from U.S. Congressman Sam Johnson to OECD Secretary General Donald Johnston. Doc 2001-996 or 2001 WTD 6-10 .

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