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CF&P Foundation Press Release, Nov. 16, 2005

Center for Freedom and Prosperity Foundation

For Immediate Release
Wednesday, November 16, 2005
202-285-0244
www.freedomandprosperity.org

OECD Tax Harmonization Scheme Stymied:
Most Low-Tax Jurisdictions Hold Firm on
Level Playing Field Demand, Other Jurisdictions
Reject the Tax Cartel Altogether

Melbourne, Australia (Wednesday, November 16, 2005) The Organization for Economic Cooperation and Development's "harmful tax competition" project suffered another setback this week as low-tax jurisdictions refused to acquiesce to the Paris-based bureaucracy at a November 15-16 Global Forum in Melbourne, Australia.  The OECD had hoped that so-called tax havens would agree to emasculate their attractive policies in order to help high-tax nations stop the flow of jobs and capital to low-tax nations.

The OECD's anti-competition project began in the 1990s and resulted in the release of a "tax haven" blacklist in 2000, a move that was widely criticized since many OECD nations including Luxembourg, Switzerland, the United Kingdom, and the United States conveniently were omitted from the list even though they were tax havens according to the OECD's own definition. Battered by accusations of discrimination, the Paris-based bureaucracy suffered a defeat as it was forced to agree that low-tax jurisdictions were not obliged to surrender their fiscal sovereignty unless OECD member nations agreed to abide by the same misguided policies. This is the famous "level playing field" condition.

Incurring another defeat, the OECD then was forced to unofficially expand its tax haven blacklist at the 2004 Berlin Global Forum thus creating an even bigger list of jurisdictions that would have to agree to bad policy in order to achieve a level playing field.

The OECD's losing streak remained intact at the Melbourne Global Forum. For instance:

  • No OECD member nation agreed to eviscerate its tax and privacy laws to facilitate extra-territorial tax collection by foreign governments. This means the so-called level playing field does not exist.
     
  • Not a single low-tax jurisdiction from the OECD's original blacklist has agreed to surrender its fiscal sovereignty in the absence of a level playing field.
     
  • The OECD was not able to convince four of its own member nations (Austria, Belgium, Luxembourg, and Switzerland) to become "participating partners." As such, these nations are not obliged to emasculate their tax and privacy laws to help other nations track and tax flight capital even if other nations make that mistake. This means the level playing field does not exist and almost certainly never will exist.
     
  • Of the 16 low-tax jurisdictions on the OECD's unofficial Berlin blacklist (6 from the original 2000 blacklist and 10 new jurisdictions), 14 declined to make any commitment to the OECD's anti-tax competition project. Singapore and Malaysia were among the nations that attended the Forum and rejected the OECD, while many others did not even bother to show up. Like the 4 OECD nations that are not "participating partners," these nations and territories are not obliged to help other nations track and tax flight capital even if other nations make that mistake. This means the level playing field does not exist and almost certainly never will exist.
     
  • Last but not least, the report issued at the conclusion of the Global Forum did not contain any specific timetable or commitment to implement policies that would hinder tax competition. Instead, the report was filled with banal language about "cooperation" and "progress."

Andrew Quinlan, President of the Center for Freedom and Prosperity, remarked, "I am delighted that the Global Forum was a flop. The OECD's campaign to prop up the punitive tax systems of Europe's welfare states is based on bad tax policy and is contrary to global economic growth." Moreover, Quinlan said, "Stripping away the diplomatic niceties, the final report after the Forum shows that the OECD is no closer to its goal than it was five years ago when the Center for Freedom and Prosperity was created."

Daniel Mitchell, Senior Fellow at the Heritage Foundation, noted, "Tax competition encourages better policy by rewarding jurisdictions that lower tax rates and rationalize their tax systems. This is why the OECD's failure is good news for the world economy." Mitchell also stated, "The post-Forum report made for amusing reading. It lists the ways in which jurisdictions have the ability to enforce the bad tax laws of nations such as France and Germany, but conveniently avoids the more important issue of whether any of these jurisdictions are willing to put foreign law above domestic law."

Commenting from Washington, DC, Veronique de Rugy of the American Enterprise Institute added, "Uncompetitive welfare states should not be allowed to impose anti-growth tax policy on the rest of the world. It is encouraging that the OECD's hypocritical project remains stalled." Furthermore, de Rugy remarked, "The United States is the world's largest beneficiary of tax competition, so it is no surprise that the U.S. Congress is increasingly interested in de-funding the OECD."

The Center for Freedom and Prosperity played a key role in the outcome. Along with Australia's Centre for Independent Studies and the Heritage Foundation, the Center for Freedom and Prosperity hosted a November 14 pro-tax competition conference in Melbourne. The Center for Freedom and Prosperity also released a Prosperitas research paper explaining why the OECD's anti-tax competition project should be rejected. The Center for Freedom and Prosperity also released letters from U.S. Senators Jim DeMint, James Inhofe and George Allen and U.S. Representatives Debra Pryce and Clay Shaw expressing their support for tax competition policies.

_______________________________

Center for Freedom and Prosperity Foundation
P.O. Box 10882
Alexandria, Virginia 22310
Phone: 202-285-0244
www.freedomandprosperity.org
cfp@freedomandprosperity.org

 

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