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CFP Weekly Update, April 29, 2002

Center for Freedom and Prosperity's Weekly Update

1) Washington Update

2) Senior Democratic Member of Congress Endorses Tax Competition…Warns Administration of OECD & EU Tax Schemes

3) Coalition of more than 20 influential free-market groups endorses territorial taxation...Condemns fiscal protectionism in Baucus-Grassley legislation

4) Veronique de Rugy of the Cato Institute defends the right to emigrate

5) Rush Limbaugh: "Battle with Bermuda over taxes…"

6) Mitchell blasts EU Savings Tax Directive

7) CFP: The OECD Lays an Egg: Low-Tax Jurisdictions Will Achieve Final Victory When EU Savings Tax Directive is Defeated

8) Bert Ely:  The New Money Laundering Law Won't Stop International Terrorism

9) Quinlan and Mitchell to Speak at Nassau Conference later this Week

10) Hartman: Coercing Cooperation From Offshore Financial Centers

11) Do You Need Financial Privacy?

12) French Elections…Sometimes you get what you vote for…

13) CFP Clips

 

1) Washington Update

The Capitol Hill demagoguery regarding corporate expatriations has sunk to a new low.  Democratic House Leader Richard Gephardt claims that these companies – which will continue to employ American workers and continue to pay tax to the U.S. government on all income earned in America – are unpatriotic. Blocking this protectionist legislation will be a major project for the Center, and we have started strong. Already, more than 20 of the country's largest and most influential free-market groups have signed a joint letter asking the chairmen and ranking members of the House and Senate tax writing committees to reject legislation to restrict expatriations. Rush Limbaugh, America's most influential radio talk show host, highlighted the issue in one of his Morning Updates.

Shifting to the EU Savings Tax Cartel, Dan Mitchell of the Heritage Foundation wrote a hard-hitting article condemning the initiative for The International Economy magazine. On another note, Congressman Ralph Hall sent a letter to Secretary O'Neill endorsing tax competition. We also have two great reports, one explaining why new money laundering laws will hinder the fight against crime and the other on the illegitimacy of the OECD/FATF persecution of low tax countries.

 

2) Senior Democratic Member of Congress Endorses Tax Competition…Warns Administration of OECD & EU Tax Schemes

Ralph Hall, senior Democratic Member of Congress from Texas with 22 years of service, sent a letter to the Bush Administration endorsing tax competition and warning against the OECD and EU tax schemes. The following is an excerpt from the letter:

"Thanks to the Reagan tax cuts and the recent Bush tax cuts, the United States has a low tax burden compared to other industrialized nations, and this has helped us attract jobs and capital from around the world. Needless to say, America has nothing to gain and much to lose if international bureaucracies such as the Organization for Economic Cooperation and Development and the European Union succeed in replacing tax competition with tax harmonization." [Link to full letter below:]
http://www.freedomandprosperity.org/ltr/ralphhall/ralphhall.shtml

 

3) Coalition of more than 20 influential free-market groups endorses territorial taxation...Condemns fiscal protectionism in Baucus-Grassley legislation

The Coalition for Tax Competition sent letters urging the Chairmen and ranking members of the House and Senate tax writing committees to reject fiscal protectionism and instead reform the internal revenue tax code so that American companies would not have a reason to relocate overseas.

Andrew F. Quinlan, President of the Center for Freedom and Prosperity, said, "We should not punish workers, consumers, and shareholders by restricting the right of companies to adopt a new home country.  Lawmakers should make America's tax system more attractive instead of imposing protectionist barriers against the free flow of goods and services." [Link to full press release below:]
http://www.freedomandprosperity.org/press/p04-24-02/p04-24-02.shtml

Link to Coalition letter:
http://www.freedomandprosperity.org/ltr/ctc3/ctc3.shtml

Press coverage:

April 25, 2002, Tax-News.com, Strong Lobby Mounted Against Corporate Tax Legislation
http://www.tax-news.com/asp/story/story.asp?storyname=8006

April 25, 2002, The Royal Gazette, By Lilla Zuill, Millions sign up against planned US 'patriot tax'
http://www.theroyalgazette.com/apps/pbcs.dll/article?Date=20020425&Category=BUSI NESS&ArtNo=104250003&Ref=AR

April 19. 2002, The Royal Gazette, By Lilla Zuill, Free market guru stokes Patriot Tax controversy
http://www.theroyalgazette.com/apps/pbcs.dll/artikkel?SearchID=73096337940015&Avi s=RG&Dato=20020419&Kategori=BUSINESS&Lopenr=104190031&Ref=AR

April 17, 2002, TheDeal.com, by Robert Willens, The Bermuda angle
http://208.185.43.170/NASApp/cs/ContentServer?pagename=TheDeal/TDDArticle/Stan dardArticle&c=TDDArticle&cid=1019060234840

April 16. 2002, The Royal Gazette, by Magnus Henagulph, Premier moves to stem US anti-tax drive
http://www.theroyalgazette.com/apps/pbcs.dll/artikkel?SearchID=73096337940015&Avi s=RG&Dato=20020416&Kategori=NEWS&Lopenr=104160002&Ref=AR

April 12. 2002, The Royal Gazette, By Mairi Mallon, US Senate intensifies drive to stop 'immoral' tax dodgers
http://www.theroyalgazette.com/apps/pbcs.dll/artikkel?Avis=RG&Dato=20020412&Kat egori=NEWS&Lopenr=104120019&Ref=AR

 

4) Veronique de Rugy of the Cato Institute defends the right to emigrate. As a former tax slave to the French government, Veronique de Rugy is perfectly positioned to comment on the right of taxpayers – business and individual – to flee bad fiscal policy.

April 18, 2002, National Review Online, By Veronique de Rugy, Bermuda Straight: Government greed is causing corporate flight.
http://www.nationalreview.com/nrof_comment/comment-rugy041802.asp

April 19, 2002, The Deal.com, by Veronique de Rugy, There's nothing unpatriotic about expatriation
http://www.thedeal.com/NASApp/cs/ContentServer?pagename=TheDeal/TDDArticle/S tandardArticle&c=TDDArticle&cid=1019235969053

 

5) Rush Limbaugh: "Battle with Bermuda over taxes…"

Last but certainly not least, America's number-one talk radio host, Rush Limbaugh, featured the controversy of many U.S. companies moving to Bermuda in a recent 90-second morning update.  Text of the update is below along with a link to the audio clip of his comments:

April 18, 2002, Rush Limbaugh's Morning Update, Bermuda Blues
http://mfile.akamai.com/5020/wma/rushlimb.download.akamai.com/5020/clips/02/04/MU 041802.asx

Rush Limbaugh's Morning Update
Thursday, April 18, 2002

Bermuda Blues

You may not know that America is engaged in a battle with Bermuda over taxes - so let me bring you up to speed. You see, the Democrats are planning an assault on American businesses relocating to Bermuda to reduce their tax burden. Democrats claim these corporations are putting profits ahead of patriotism.

In the Senate, Finance Committee leaders have vowed to stop these moves. Montana Democrat Max Baucus, who heads the committee, says the legislation will put the brakes on the potential rush to move U.S. corporate headquarters to tax havens, and in the House there are two bills singling out Bermuda as a tax haven. Now, in order to stop companies considering a move, Democrats want to tax all income including foreign sales earned by businesses that reincorporate outside the U.S.

Bermuda's Premier, Jennifer Smith, disputes the notion that Bermuda is a tax haven. She notes that international companies pay the same taxes local business do. She says companies are drawn to Bermuda for its superior financial services, and aren't granted special concessions. So, companies move in order to stay competitive and grow their business. Rather than cut taxes, allowing them to grow and create jobs, Democrats would rather punish them if they stay, and punish them if they move.

As for putting profits ahead of patriotism, let me remind you and these Democrats, the American Revolution was the direct result of oppressive taxation. Our Founders, unlike these Democrats, understood the morality of profits. That's the Bermuda tax-angle you need to remember.

 

6) Mitchell blasts EU Savings Tax Directive.

One of the Center's main goals is the defeat of the EU's proposed Savings Tax Cartel. As explained below, blocking this misguided tax scheme will "kill two birds with one stone." Not only will victory protect American financial institutions from having to act as vassal tax collectors for Europe's welfare states, but victory also will give low-tax jurisdictions persecuted by the OECD a perfect excuse to tear up their so-called commitment letters to the Paris-based bureaucracy. In an article for the influential The International Economy magazine, Dan Mitchell of the Heritage Foundation explains why the EU Savings Tax Cartel is contrary to America's national interests. [Link to PDF article below:]
http://www.freedomandprosperity.org/Articles/mitchell4.pdf

And while we are on the topic, Graham Mather of the European Policy Forum succinctly explains why the EU's Savings Tax Cartel is collapsing. The United Kingdom's quirky Chancellor of the Exchequer, Gordon Brown, certainly seems to be justifying his reputation as a lightweight. [Link to article below:]

April 24 2002, The Financial Times, by Graham Mather, A flawed tax plan: Britain's proposed replacement for the EU withholding tax is causing more problems than the original, says
http://news.ft.com/ft/gx.cgi/ftc?pagename=View&c=Article&cid=FT3EZA9JF0D

 

7) CFP: The OECD Lays an Egg: Low-Tax Jurisdictions Will Achieve Final Victory When EU Savings Tax Directive is Defeated

CFP President Andrew F. Quinlan said:

This announcement of a new "blacklist" is a non-event. The OECD agenda is a combination of imperialism (they targeted small jurisdictions) and hypocrisy (they did not apply the same rules to developed nations). Fortunately, the "commitments" made by low-tax jurisdictions are not binding unless all OECD member nations agree to the same misguided rules. This is why stopping the EU Savings Tax Directive is now a top priority.

This will not happen. Extraterritorial taxation is not in the U.S.'s best interests. The U.S. needs to take this opportunity and reform its tax system to attract more overseas capital, not scare it away. The Center for Freedom and Prosperity will work hard over the next several months to insure that all lawmakers, policy makers, opinion leaders and taxpayers are aware of the threat that tax harmonization schemes from the OECD and EU pose to America's national interests. [Link to full CFP press release below:]
http://www.freedomandprosperity.org/press/p04-18-02/p04-18-02.shtml

Press Clips:

April 25, 2002, Tax-News.com, by Mike Godfrey, OECD Commitment Letters Slammed By US Think-Tanks
http://www.tax-news.com/asp/story/story.asp?storyname=7998

April 22, 2002, The Royal Gazette, By Mairi Mallon, US group slams OECD letters of commitment
http://www.theroyalgazette.com/apps/pbcs.dll/article?Date=20020422&Category=BUSI NESS&ArtNo=104220017&Ref=AR

April 19, 2002, The Bureau of National Affairs, Model Information Exchange Agreement Presented for OECD Tax Havens Initiative
http://www.freedomandprosperity.org/Articles/bna04-19-02/bna04-19-02.shtml

April 22, 2002, Tax-News.com, by Ulrika Lomas, US Treasury Claims Credit For Tax Haven Agreements
http://www.tax-news.com/asp/story/story.asp?storyname=7960

April 19 2002, The Associated Press, By Curt Anderson, Report says only seven tax havens remain following campaign
http://www.sun-sentinel.com/business/local/sfl-ztaxhaven19apr19.story?coll=sfla%2Db usiness%2Dheadlines

 

8) Bert Ely: The New Money Laundering Law Won't Stop International Terrorism

Bert Ely, president of Ely & Company, a consulting company for financial institutions, contends that the new anti-money laundering provisions of the USA Patriot Act will do nothing to stop the financing of international terrorism. If such measures worked, the Suspicious Activity Reports (SARS) that are required to be filed under the Bank Secrecy Act even before September 11th would have snagged convicted CIA spy Aldrich Ames and convicted FBI spy Robert Hansen. Rather, the new regulations provide evildoers with a roadmap of how to avoid detection.

The real rationale behind the new anti-money laundering provisions is to have the United States fall into line with the campaign being waged by the Organization for Economic Cooperation and Development and the Financial Action Task Force (FATF) against countries that serve as tax havens. That campaign is counterproductive from a free market standpoint in that tax havens allow capital to leave countries that impose corruption and unfair regulatory and tax burdens upon their citizens.

Chasing money trails is a misguided tactic that fails to stop crime before it starts; the better way is to work harder at penetrating the actual terrorist networks. [Link to paper below:]

Link to full report below: Readers also may want to visit the Center for Technology Policy's website. This Bert Ely paper is just one example of the excellent work produced by this division of the Free Congress Foundation:
http://www.freecongress.org/centers/technology/

First Quarter 2002, The Center for Technology Policy at the Free Congress Foundation, by Bert Ely, The New Money Laundering Law Won't Stop International Terrorism
http://www.freedomandprosperity.org/Papers/ely/ely.shtml

 

9) Quinlan and Mitchell to Speak at Nassau Conference later this Week

CFP President Andrew Quinlan and Heritage Foundation Senior Fellow Dan Mitchell are scheduled to speak at the First Annual Global Conference on Offshore Tax Planning, Compliance and Money Laundering to be held in Nassau, The Bahamas starting on Thursday, May 2 to Saturday, May 4, 2002.

Quinlan looks forward to the conference because "many of the speakers have been very involved in the battle to protect tax competition, financial privacy and fiscal sovereignty."

Dan Mitchell also commented that the conference is an opportunity to hear a balanced debate.

CFP encourages anyone interested in the issues to attend the conference. Below is a link to the Conference's web page.

In addition, both Quinlan and Mitchell are available to meet in private with anyone interested.  Please respond to this e-mail or call 202-285-0244 to set up an appointment while they are in Nassau.

Global Conference on Offshore Tax Planning, Compliance and Money Laundering
http://www.stu.edu/tax/conference/

Conference Brochure:
http://www.stu.edu/tax/Conference/Conference_Brochure.pdf

 

10) Hartman: Coercing Cooperation From Offshore Financial Centers

From the Boston College International and Comparative Law Review:

[Abstract:] International initiatives concerning the global financial system traditionally have been implemented through the building of consensus among affected states to identify problems and then set forth the means to deal with those problems. Recently, however, under the title Actions Against Abuse of the Global Financial System, the G7 nations began a campaign that uses the threat of sanctions to coerce cooperation from offshore financial centers in the areas of money laundering and tax competition. The use of sanctions to force compliance is problematic because, although sanctions would be available to remedy a violation of an international obligation, there has been no attempt to identify any such obligation for the Object States. Instead the Financial Action Task Force (FATF) and the Organization for Economic Cooperation and Development (OECD), in accordance with the agenda of the G7, have set forth self-referential criteria that assess compliance of the offshore financial centers with presumed international "standards" against money laundering and harmful tax competition. The legal enforceability of the sanctions threatened for non-compliance, however, depends upon the existence of legal bases for both sets of criteria. This Article attempts to determine whether such bases exist.  [Link to full article below;]

2001, Boston College International and Comparative Law Review, Vol.24, No. 2, by Benjamin R. Hartman, Coercing Cooperation From Offshore Financial Centers: Identity and Coincidence of International Obligations Against Money Laundering and Harmful Tax Competition
http://www.bc.edu/bc_org/avp/law/lwsch/journals/bciclr/24_2/02_FMS.htm

 

11) Do You Need Financial Privacy?

In the last few days there has been several news reports on the U.S. Government's renewed attempt to stop money laundering and terrorism.  Earlier this month, the Task Force on Information Exchange and Financial Privacy issued a comprehensive and well received report on the best way to collect the information needed to combat money laundering and terrorism while protecting our civil rights and individual freedoms.  Richard Rahn's Washington Times op-ed below discusses the finding of the Task Force. Please forward this op-ed and link to the full report to anyone you think may be interested in this important issue.

April 18, 2002, The Washington Times, by Richard W. Rahn, Do You Need Financial Privacy?
http://www.washtimes.com/commentary/20020418-3219699.htm

Link to CFP's press release and Task Force Report:
http://www.freedomandprosperity.org/press/p04-03-02/p04-03-02.shtml

 

12) French Elections…Sometimes you get what you vote for…

We have been asked by many in the press to comment on the French elections. Veronique de Rugy of the Cato Institute, a French national, merely notes that the one candidate in support of free markets, Alain Madelin, received only 4 percent. Chirac and Le Pen are both anti-capitalist, and the French political elite remain hostile to liberty. The links below provide some useful analysis.

April 27, 2002, Cato Institute, by Veronique de Rugy, The French Never Learn
http://www.cato.org/dailys/04-27-02.html

April 15, 2002, The Weekly Standard, by David Brooks, Among the Bourgeoisophobes: Why the Europeans and the Arabs, each in their own way, hate America and Israel.
http://www.weeklystandard.com/Content/Public/Articles/000/000/001/165xqyni.asp

April 26, 2002, The National Review, by Jonah Goldberg, Le Pen Fever: The European streets
http://www.nationalreview.com/goldberg/goldberg042602.asp

April 29, 2002, The National Review Online, By Martin Sieff, Le Pen Can Do It: Thinking the unthinkable.
http://www.nationalreview.com/comment/comment-sieff042902.asp

 

13) CFP Clips

April 22, 2002, Tax-News.com, by Mike Godfrey, ABIC Slams US Patriot Tax As 'Bad Law'
http://www.tax-news.com/asp/story/story.asp?storyname=7956

April 22, 2002, Tax-News.com, by Ulrika Lomas, OECD Turns Spotlight On Switzerland And Luxembourg
http://www.tax-news.com/asp/story/story.asp?storyname=7959

April 15, 2002, Competitive Enterprise Institute, by Eileen Ciesla, Will The United States Let The European Union Regulate Our Chemicals Industry Through The OECD?
http://www.cei.org/utils/printer.cfm?AID=2960

April 18, 2002, The Times (UK), By Melissa Kite, Tax havens of the rich come under scrutiny
http://www.thetimes.co.uk/article/0,,1737-270860,00.html

April 22, 2002, Financial Times, By Florian Gimbel and Simon Targett, SURVEY - FTFM: Investors to fight tax barriers: Bolkestein urged to tear down measures costing industry up to Dollars 14bn a year
http://globalarchive.ft.com/globalarchive/article.html?id=020422000893

April 23, 2002, Tax-News.com, by Jason Gorringe, KPMG Guernsey Warns Over Controlled Foreign Company Provisions In UK Budget
http://www.tax-news.com/asp/story/story.asp?storyname=7974

 

Best regards,

Andrew Quinlan
Center for Freedom and Prosperity
President
202-285-0244
208-728-9639 (efax)
quinlan@freedomandprosperity.org
www.freedomandprosperity.org

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