Online link to article on MSNBC.com:
July 30, 2001
Virginian Fights For International Tax Havens:
Lobbyist Finds Bush Receptive to Ideas Clinton Rejected
By DAVID S. CLOUD
Staff Reporter of THE WALL STREET JOURNAL
WASHINGTON -- The identical postcards started trickling in to the Treasury earlier this month. Warning that "a high-tax global cartel threatens American taxpayers, American privacy and American
sovereignty," they urged Treasury Secretary Paul O'Neill "to stop [it] cold."
A grass-roots movement this isn't. Instead, the letters are the work of a lobbyist here with a home office in suburban Virginia, and allies among both the city's antitax conservatives and lawyers for
And the ominous "cartel"? That turns out to be the 30-nation Organization for Economic Cooperation and Development, to which the U.S. belongs. With U.S. support, the Paris-based OECD has
pushed for years for reforms in places -- such as the Cayman Islands and the tiny Alpine kingdom of Liechtenstein -- where strict bank-secrecy laws and low or nonexistent taxes allow rich foreigners to hide their
income from their own countries' tax collectors, including the Internal Revenue Service.
Lately, the crackdown has shown signs of stalling: OECD has pushed back the earliest possible sanctions on its "blacklist" of shelter countries; it has stopped calling for those countries to
charge foreigners the same taxes it charges its own citizens; and it faces a move to limit a proposed sharing of information about shelter accounts.
That's thanks in part to the lobbying effort. But the shift also reflects the greater receptivity of the new Bush administration to the opposition's arguments -- making the tax-haven issue one of the
clearest of many examples throughout the government where a change in White House control can mean real change in policy.
A leader of the tax-shelter forces is Andrew Quinlan, a lobbyist with a flair for guerrilla tactics; the letter-writing campaign is his doing. Mr. Quinlan, a former Republican congressional aide who
previously lobbied for the Geneva-based Swiss Investors Protection Association, now runs an organization called the Center for Freedom and Prosperity out of his house. "We're going to end up generating probably
100,000 pieces of mail," he predicts.
In that and more direct ways, he and his coalition of antitax activists and attorneys for foreign banks are pressuring the Bush administration to back away from the OECD efforts, which the Clinton
administration had backed strongly.
"I think it's fair to say Treasury is interested in what this group has to say," says Thomas Delaney, a Washington lawyer whose clients include Liechtenstein and overseas banks.
Mr. Quinlan and a group that included Dan Mitchell, a fellow at the conservative Heritage Institute think tank here, met in June with top White House economic adviser Lawrence Lindsey and with Glenn
Hubbard, who chairs Mr. Bush's Council of Economic Advisers. Mr. Lindsey "recommended we meet with Secretary O'Neill," according to a letter the group sent to the Treasury Department. They haven't met with
Mr. O'Neill, but two weeks ago Mr. Delaney, Mr. Quinlan and other critics met with the Treasury's Mark Weinberger, the assistant secretary for tax policy.
Last year, the OECD listed 35 countries and other jurisdictions, including 17 in the Caribbean, as tax havens. Just four have since signed an agreement committing to banking reforms. Six more
countries avoided the list by agreeing to changes before it came out, but haven't fully complied with their promises.
The IRS estimates it loses $70 billion annually from Americans with offshore accounts. But opponents argue that the government must respect both its citizens' privacy, and the laws of the overseas
countries that legally shelter the Americans' income. They warn that a crackdown could devastate some of those countries.
Secretary O'Neill insists the U.S. remains committed to fighting tax evasion, but he has questioned whether the OECD should be goading other nations to change their tax laws. Under U.S. pressure since
Mr. Bush took office, the OECD no longer is pushing offshore centers to charge the same taxes on foreign accounts that they do on their own citizens. Meanwhile, its members last month put off the possibility of
sanctions against countries on the organization's tax-shelter blacklist until at least 2003.
"The heat on offshore tax havens seems to be cooling," says Robert Bauman, a former GOP congressman from Maryland who writes a newsletter promoting offshore tax schemes.
Another focus of the lobbying is the OECD's effort to define what personal tax information should be exchanged between two countries. Some OECD members want to force tax havens to transfer
automatically data on the accounts of all depositors. But opponents want to restrict countries to getting such information only when they can show probable cause to suspect criminal tax evasion.
"My clients include Swiss banks, and so you might anticipate that they regard the OECD initiative as extremely intrusive and overreaching," Mr. Delaney says.
The Bush administration says it hasn't reached a final position on the information-exchange issue. "There clearly needs to be a balance" between law enforcement and privacy, says the
Treasury's Mr. Weinberger. "We will weigh that balance, but have not yet settled on any specific language." Mr. Quinlan and his allies, Mr. Weinberger adds, "aren't too happy" that the Treasury
didn't immediately adopt their position.
Their meeting with Mr. Weinberger was arranged by a second recently formed group, called the Task Force on Information Exchange and Financial Privacy; it includes Mr. Quinlan and Mr. Delaney and some
of his allies, along with former GOP vice-presidential nominee Jack Kemp and Reagan administration Attorney General Edwin Meese.
With a push from Mr. Quinlan, congressional GOP leaders such as House Majority Leader Dick Armey and Majority Whip Tom DeLay, both of Texas, have written to Mr. O'Neill complaining about the OECD
efforts. Meanwhile, the opponents have traveled to the Cayman Islands, Panama, Barbados, Liechtenstein and other target countries to urge local officials and businesses not to buckle. Messrs. Quinlan and Mitchell
and others even persuaded tiny Antigua to designate them as its official delegates to a January OECD summit with other Caribbean tax-haven countries in Barbados. OECD staffers recognized the intruders, and insisted
that Antigua remove them. "We were thrown out of the room," Mr. Quinlan says with satisfaction.
Not surprisingly for an organization battling for the privacy of offshore bank accounts, Mr. Quinlan's year-old Center for Freedom and Prosperity won't disclose exactly who bankrolls its lobbying.
Donors "are people so concerned about privacy that they want to remain anonymous, because they are worried about being reported to the IRS," says Mr. Mitchell.
All the group will say is that its contributors include conservative foundations, privacy advocates and corporations, and that the organization gets by on a shoestring budget -- roughly $75,000 last
year, though it will be larger this year.
The Senate Governmental Affairs Committee began asking questions earlier this month about the center's backers, as part of its investigation of offshore tax shelters. Among the panel's questions:
whether the center received money from foreign governments the OECD has targeted. Mr. Quinlan had his lawyer call the committee and refuse to answer questions about their donors.
"It's none of their business," he says. "It's our ideas they don't like."