Center for Freedom and Prosperity Strategic Memorandum
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To:  Leaders of Low-Tax Jurisdictions and Supporters of Tax Competition, Financial Privacy, and Fiscal Sovereignty

From:  Dan Mitchell, Heritage Foundation

Date:  June 16, 2001

Re:  OECD Developments
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 We have gained another victory in the battle for individual liberty. The OECD has backed down in the face of U.S. opposition. The headlines tell the story:

• Lloyd's List, June 15, "Defiant offshore financial centres scent victory over sanctions threat."
• BNA, June 15, "Bush Administration Seeking New Focus to OECD Tax Competition Work, Official Says."
• Wall Street Journal, June 15, "U.S., Allies to Ease Curbs on Offshore Tax Havens."
• Tax-news.com, June 14, "OECD May Delay Sanctions."
• AFX News Service, June 13, "U.S. wants 'redirection' of OECD tax havens plan."
• Bloomberg, June 12, "OECD Likely to Push Back Tax Haven Sanctions Deadline."

But don't break open the champagne bottles. As we have indicated in previous memos and in yesterday's alert, we still have to win the second stage of the battle – how to define when it is appropriate for governments to suspend financial privacy and to share data with other governments. If information exchange means cooperating in the fight against crime while respecting civil liberties and due process legal protections, we will have won. On the other hand, we will have lost if information exchange means that governments can indiscriminately obtain private financial data in order to enforce their tax laws on an extra-territorial basis.

The Center for Freedom and Prosperity and the Heritage Foundation, in cooperation with a growing list of allies, will be fighting very hard to ensure that information exchange is subject to appropriate safeguards. In particular, we look forward to working with our friends at Americans for Tax Reform, the Free Congress Foundation, the National Taxpayers Union, the Prosperity Institute, and others on this critical project.

At this stage, there are only two things that could lead to defeat. We could lose if the U.S. government acquiesces to the OECD definition of information exchange. Given the many statements from the Treasury Department – all of which indicate that information exchange should be on a case-by-case basis for criminal investigations, we think that is unlikely. The other way we could lose is if a bunch of targeted jurisdictions suddenly and inexplicably decide to surrender to the OECD, giving the bureaucrats in Paris a fait accompli victory. Because of all the progress we have made, we strongly urge targeted jurisdictions to hold firm. As we have said many times before, if you had the courage to resist one year ago when it appeared that the OECD had a 99 percent chance of victory, then there is no need to give up now that the odds have shifted so dramatically. Indeed, we encourage jurisdictions that have capitulated to announce that they are re-evaluating their decision.

One bit of news that may help bolster resistance to the OECD is that the Center for Freedom and Prosperity has launched an aggressive grassroots campaign. The first stage of this campaign is an Internet advocacy promotion. This effort so far has generated about 10,000 e-mails to either members of Congress or the Treasury Secretary. The next stage of the campaign is a direct-mail crusade. The Center already has contracted to send out 100,000 pieces of mail to targeted citizens and will send many more based on how much money is raised for the project.

In conclusion, there is an "inside-outside" strategy to win the battle on information exchange. The Heritage Foundation's research and the Center's lobbying will ensure that policy makers in Washington have the right facts and figures to make the correct decision. The Center's grassroots advocacy campaign, meanwhile, will generate pressure on politicians from back home so that they will make the right decision even if they are not convinced by the compelling truth of our arguments.

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