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Tax Notes International

March 27, 2001

Congressional Black Caucus Says OECD
Tax Move Unfairly Blasts Developing Nations

by Cordia Scott

     Twenty-six of the 38 members of the Congressional Black Caucus -- including outspoken liberal Democrat Charles B. Rangel, D-NY -- have signed a letter to U.S. Treasury Secretary Paul O'Neill decrying the United States's involvement in an OECD move they say will unfairly undermine the fragile economies of some of the country's closest neighbors and allies.

     Although the letter is just the latest in an ever-growing stack on the new treasury secretary's desk, it is significant in that it was signed by the vast majority of the heavy-hitting, left-leaning group. The development is an eyebrow-raiser for the many who had dismissed efforts to persuade the new Bush administration to speak out against the OECD's international campaign against so-called "harmful" tax competition as a conservative Republican issue. Every one of the 26 signers belongs to the Democratic Party. (For prior coverage, see Tax Notes Int'l, 26 March 2001, p. 1479, or 2001 WTD 55-1.)

     Perhaps the most eye-catching name on the letter belongs to Representative Rangel, the senior Democratic member of the Committee on Ways and Means. Rangel has proven himself to be a champion of minority rights not only in the United States but around the world. He worked tirelessly over the past four years on legislation to authorize a new trade and investment policy for sub-Saharan Africa. He led two trade missions to the area with former President Bill Clinton and successfully garnered enough support to pass "The Trade and Development Act of 2000," which Clinton signed on 18 May 2000. Now Rangel and his like-minded colleagues have seized the tax competition issue. In their letter, they primarily focus on the OECD's threat to place harsh economic sanctions on Caribbean nations:

    The free flow of capital plays a critical role in improving economic conditions in poorer nations.Workers benefit from the increased job opportunities and higher wages. Governments also benefitbecause, even at lower rates of tax, there are both direct and indirect increases in revenue. These arefunds that are critically needed to provide education, health care, and other social services. TheOECD should not be encouraged to use a high-handed approach and to act in bad faith by ignoringthe principles of transparency and fairness in this matter.

     The letter also charges the OECD with crafting an international media campaign that has succeeded in painting such nations as actively engaging in money laundering and "unsound regulatory processes." The CBC counters that many of these nations have enhanced their anti-money laundering regulations through the assistance of international funding agencies and their own national resources. Such charges should no longer hold much weight, they say.

     Finally, the CBC also signs on to the same argument raised by each of the other Republican lawmakers who have sent their own letters to O'Neill: the OECD effort to stamp out tax competition is not in America's national interests. U.S. Senator Richard C. Shelby, R-Alabama, and U.S. Representative Roscoe Bartlett, R-Maryland, each also argued that line in their respective letters they sent to O'Neill in mid March. The United States benefits greatly from the "healthy competition between nations," Shelby pointed out in his 19 March letter. "Indeed, our attractive tax and privacy policies for foreign investors have helped attract trillions of dollars of capitol into our economy," he wrote. He said he was "very concerned" that the OECD is trying to put a stop to "this beneficial influx of capitol." Bartlett said the OECD's real agenda is to "make it easier for Europe's welfare states to tax income on a worldwide basis." The United States should defend all nations' right to adopt market-based tax and privacy laws, he said, "particularly since many of our high-tax competitors would like to use the OECD attack on low-tax countries as a precedent to undermine America's comparative advantage."

     Cordia Scott is chief of correspondents and press watch editor for Tax Analysts' internationalpublications. Adrion Howell, who also is with Tax Analysts, also helped with the preparation of thisarticle.

Documents

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

     o Letter from the Congressional Black Caucus to U.S. Treasury Secretary Paul O'Neill, 2001 WTD XXXX, or Doc 2001-8775(2 original pages);

     o Letter from U.S. Senator Richard Shelby to U.S. Treasury Secretary Paul O'Neill, 2001 WTD 56-31, or Doc 2001-8393(1 original page);

     o Letter from U.S. Representative Roscoe Bartlett to U.S. Treasury Secretary Paul O'Neill, 2001 WTD 56-30, or Doc 2001-6036(2 original pages)

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