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Tax Notes International

April 27, 2001

Armey Presses White House on OECD Tax Competition

by Cordia Scott

     U.S. House Majority Leader Dick Armey on 26 April urged President George W. Bush's national economic adviser Larry Lindsey and U.S. Assistant Treasury Secretary Mark Weinberger to withdraw the United States's support of the OECD's "harmful" tax competition initiative. Lindsey was reportedly taken by surprise as he thought the day's talks were going to focus on tax cuts.

     Armey told the administration officials the move is meant only to benefit high-tax European countries that fear low tax nations are stealing tax revenues by offering lower tax rates. Armey urged them to coax the Bush Administration to change its stance, even though the Clinton Administration had supported the OECD move.

     Armey has been an outspoken leader on this issue since last fall when he took former U.S. Treasury Secretary Lawrence H. Summers to task for endorsing it. Just last month, Armey wrote a letter to new U.S. Treasury Secretary Paul O'Neill, decrying the OECD's campaign as an underhanded way of trying to establish a global "tax cartel." (For the full text of this letter, see 2001 WTD 54-48 or Doc 2001-7962 (2 original pages).)

     The furor stems from a June 2000 report, in which the OECD blacklisted 35 low tax jurisdictions as tax havens and set a July 2001 deadline in which it demanded cooperation from the jurisdictions. (For the full text of the report, see 2000 WTD 124-11, or Doc 2000-17602 (31 original pages).) The OECD says those jurisdictions that don't agree to cooperate by 31 July 2001 risk punitive sanctions. Several of the sovereign nations have already acquiesced to the OECD's demands. Most haven't. "As the world's largest economy, but also as the nation that symbolizes freedom and entrepreneurship, we have a moral obligation to come to the aid of these persecuted regimes," Armey told O'Neill in March.

     Just last week, U.S. Assistant Treasury Secretary Mark Weinberger met with free market activists in a closed-door meeting to discuss whether the United States should continue to support the OECD effort. The participants included Daniel Mitchell -- an economist with The Heritage Foundation and the OECD's most outspoken opponent -- and Andrew F. Quinlan, who serves as co-founder of the Center for Freedom and Prosperity, along with Mitchell. Columnist Robert Novak wrote in the Chicago Sun-Times and the Washington Post that Weinberger told the meeting participants that the United States has no intention of joining the OECD in threatening sanctions against the blacklisted nations. Weinberger did say the United States would support the OECD in its goal of sharing information for the purpose of trying to reduce tax evasion. (For prior coverage, see 2000 WTD 78-13.)

     Mitchell and his colleagues issued Weinberger a letter this week asking him to hold off on making such a move, however, saying that information could be used for other purposes. (For the full text of this letter, see Doc 2001-11816) They cited the fact that more than 100 million people were killed by their own governments during the last century and that "the ability of governments to inflict such carnage on their own and other countries' citizens was facilitated by the gathering of information on people far in excess of what is needed for the operation of a civil society." Is gaining a few more tax evaders worth risking such a price, not to mention loss of privacy and economic growth?, they asked. Weinberger has yet to respond.

     Lindsey's and Weinberger's comments from their meeting with Armey are yet unknown, as well. One might guess where Lindsey's sympathies lie, though. Novak reported that Lindsey recently advised opponents of the OECD campaign to push O'Neill to give a speech on behalf of tax competition. O'Neill has yet to say much on the subject, however. Perhaps he's been waiting for the Bush Administration to weather through its first 100 days in office? If so, that 100 day mark comes early next week.

     Cordia Scott is the Chief of Correspondents and International Press Watch Editor for Tax Analysts's International Publications.


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