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Daniel J. Mitchell

August 17, 2001

Letters-to-the-Editor
The New Republic
1220 19th St. NW
Suite 600
Washington, DC 20036

Dear Editors,

 Anand Giridharadas' attack against the Treasury Department and low-tax jurisdictions ("Saved Havens," August 27 & September 3) was an amusing combination of inaccuracies and ideological bias. Some of the worst excesses include:
 

  • He implies that low-tax countries (so-called tax havens) are repositories for laundered money, yet most criminal proceeds are obtained and laundered in G-7 nations. The U.S. government's Financial Crimes Enforcement Network, for instance, admits that about half the world's money laundering occurs in America – even though the U.S. accounts for only about one-fourth of world GDP. Other industrialized nations, such as the United Kingdom, also are host to a disproportionate share of dirty money. The United Nations, meanwhile, acknowledges that criminals avoid low-tax jurisdictions because strong financial privacy laws are "a red flag" for law enforcement officials.
     
  • He identifies me as a "slick lobbyist." This may be a compliment inside Washington, but it simply is not true. I am not a lobbyist, never have been one, and hopefully never will be one (though some of my best friends…oh, never mind). My role in this debate has been to educate policy makers about why tax harmonization and extra-territorial extension of tax law are bad ideas. And as for being "slick," I don't even own a pair of black suspenders.
     
  • He states that the Bush Administration has adopted my view. If only that were true. Yes, the Treasury Department has expressed some support for international tax competition, but on the key issue – whether low-tax jurisdictions should be forced to act as vassal tax collectors for more powerful nations, the White House is sitting on the fence.
     
  • He refers to the Organization for Economic Cooperation and Development (OECD), the international bureaucracy that is pushing for tax harmonization, as "a club of 30 free-market democracies." In reality, most OECD member nations are European welfare states. If France is a free-market country, then I'm a socialist.
     
  • He writes that "tax havens" have one percent of the world's population, but this figure is based on the OECD's list of so-called havens. Not surprisingly, this list excludes the United States, the United Kingdom, Luxembourg, Switzerland, and other OECD nations that have policies for international investors that clearly qualify them as "tax havens" according to the criteria set forth by the Paris-based bureaucracy.
     
  • He argues that the "OECD's demands were modest," yet the organization is seeking to overturn centuries of international tradition by attacking the right of nations to determine their own tax and privacy laws.
     
  • He blithely says that the coalition opposing the OECD is comprised of "anti-tax libertarians, tax cheats, and corporate interests." The Coalition for Tax Competition probably does include some anti-tax libertarians, but if Mr. Giridharadas is aware of corporate supporters, he should let Mr. Quinlan know so they can be enlisted in the effort. Moreover, I challenge Mr. Giridharadas to identify even one tax cheat among the many organizations that are part of the campaign to preserve competition, privacy, and sovereignty.
     
  •  He asserts that low-tax jurisdictions distort markets by allowing taxpayers to enjoy the benefits of a high-tax country while paying the taxes of a low-tax country (akin to "paying Sears prices for the coat you got at Saks," he writes). This is a flawed analysis, however, since the disputed income is being earned in the low-tax jurisdiction. In other words, tax collectors from high-tax nations want people to pay Saks prices for coats they are buying at Sears.
     
  • He claims that the OECD is not in favor of tax harmonization, yet the organization's own publications have stated that "[T]ax should not be the dominant factor in making capital allocation decisions" and that low-tax policies "distort the location of capital and services." More importantly, the OECD wants nations to have the power to impose taxes on worldwide income, thereby ensuring that taxpayers always face the same tax rate regardless of where they earn their income.
     
  • He naively repeats the oft-cited claim that tax evasion results in $70 billion of foregone tax revenue every year. This is not a government estimate. It is an ideologically motivated guess concocted by a former Democratic Capitol Hill staff assistant.
     
  • He refers several times to CFP lobbyists, yet the organization's only employee is Mr. Quinlan. Even a modest bit of fact checking would have confirmed that the other people involved in the battle represent a variety of taxpayer organizations and free market groups.

In the final analysis, though, these errors are minor compared to the article's bias. I have no objection to having my motives investigated (and I plead guilty to the charge of being an ideological crusader), but why didn't Mr. Giridharadas subject both sides to skeptical treatment? Did he ask the OECD why it is supposedly wrong for governments to face the pressure of competition? Did he ask Senator Levin whether the collection and international sharing of private financial data is a recipe for abuse? Did he ask the French government what right they have to compel low-tax nations to put French laws above their own? Did he ask black caucus leaders whether it is appropriate for the OECD to target small non-white nations while giving their own members a free pass? Did he ask lawmakers whether the U.S. government should support an initiative that would, for all intents and purposes, make it impossible to enact fundamental tax reform?

These are the questions that should be answered. Unfortunately, in his zeal to concoct a story that fit his worldview, the author missed a chance to make a contribution to an important debate.

Sincerely,

Daniel J. Mitchell
Senior Fellow
The Heritage Foundation

 

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