June 13, 2001

The Honorable Paul O'Neill
Secretary of the Treasury
1500 Pennsylvania Avenue, N.W.
Washington, D.C. 20220

Dear Mr. Secretary:

We are writing to applaud your statement issued on May 10, 2001, regarding the OECD's project on so-called "Harmful Tax Competition." As you suggest, if the United States is to continue to participate in that OECD initiative, it must be clearly focused "on the core element that is our common goal: the need for countries to be able to obtain specific information from other countries upon request in order to prevent the illegal evasion of their tax laws by the dishonest few." Further, those information exchanges must be provided in ways that prevent the seeking of such information for improper purposes or without proper safeguards, also as you suggest.

We reaffirm the need for the united Sates to promote transparency of substantive and procedural tax laws and controlled information exchanges. Transparency is the key to the smooth functioning of all global trade and investment regimes. Information exchanges are necessary to enforce the provisions of the Internal Revenue Code and other countries' tax laws. In the case of criminal investigations, we believe in full cooperation among countries in the exchange of all necessary information to resolve such investigations.

However, we specifically recommended against the United States supporting international efforts to regulate so-called "ring fencing" or related practices, in which one jurisdiction competes with another for internal business or investment based on the favorable tax treatment that is laws accord to imported capital. As long as tax inducements are open and transparent, we believe it is good international economic policy to allow incentives for nations to keep their taxes as low and regulatory systems as unobtrusive as possible. These types of policies stimulate international trade and investment.

You declared in your may 10, 2001 statement that "The United States does not support efforts to dictate to any country what its own tax rates or tax system should be, and will not participate in any initiative to harmonize world tax systems." We believe this statement sends a clear and unequivocal message to the proponents of the OECD Harmful Tax Competition Project that the appropriate issue for them to pursue is transparency and information exchange.

We sincerely appreciate your leadership in this important area of international tax policy.

FINANCIAL EXECUTIVES INTERNATIONAL

NATIONAL FOREIGN TRADE COUNCIL

NATIONAL ASSOCIAITON OF MANUFACUTURERS

U.S. COUNCIL FOR INTERNATIONAL BUSINESS

THE TAX COUNCIL

U.S. CHAMBER OF COMMERCE

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