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CF&P E-Mail Update, July 9, 2003

Center for Freedom and Prosperity's E-mail Update

1) Quinlan Submits Written Testimony to the Senate Finance Committee on the IRS's Interest Reporting Regulation

2) CF&P and PMLA to Hold Forum in Panama on Tax Competition and the OECD's Attack on Shipping Registries

3)   CFP Hits Out At OECD Shipping Initiative

4) Richard W. Rahn: Global greed screed

5) Cato:  The New Europe Looks a Little Like `1984'

6) Marian L. Tupy:  Socialism's Farewell Note

7) Transparency International Report Slams UK Anti-Laundering Regime, Praises Dependencies

8) Kevin A. Hassett: Spending with the Best of 'Em: The Current President Is No Tightwad--Unfortunately

9) NYT: U.S. Suspends Aid to 35 Countries Over New International Court

10) Cato:  Reasonable Doubt: The Case Against the Proposed International Criminal Court

11) CF&P Clips


1) Quinlan Submits Written Testimony to the Senate Finance Committee on the IRS's Interest Reporting Regulation


There are two types of investment in the U.S. economy, direct and indirect. The typical example of foreign direct investment is a factory built by a foreign-based company. Foreign direct investment is very important to the United States and is responsible for millions of American jobs.

Indirect investment occurs when foreigners invest money in America. Foreign indirect investment can take many forms, including money deposited in U.S. banks, purchases of stocks and/or bonds issued by U.S. companies, and purchases of U.S. government debt. These various forms of indirect investment boost U.S. financial markets and help finance businesses and provide capital for home mortgages and car loans. . .

. . . U.S. banks and financial institutions benefit greatly from the bank deposits of nonresident aliens. These deposits, in turn, benefit every American by helping to create jobs, finance small business loans and improve the general welfare of all. For decades, United States lawmakers have understood the importance of attracting capital to America, which is why Congress has chosen not to tax the interest paid on bank deposits of nonresident aliens and, the further step, of not reporting this deposit income to their home governments.

In fact, foreigners have invested more than $1 trillion in capital in the United States banks. This influx of capital will be jeopardized if a proposed Internal Revenue Service rule is implemented. The regulation (133254-02) would require banks to report interest paid to nonresident aliens, although their deposits are not subject to U.S. taxes. This would harm America's economy and undermine the competitiveness of U.S. financial institutions.

Unfortunately, despite the clear intent of Congress, the Internal Revenue Service is seeking to require the reporting of bank deposit interest paid to nonresident aliens. This information, according to the proposed regulation, would then be turned over to foreign tax collectors.  The price is high, especially given that the IRS does not have the authority to issue this rule. 

More than 100 individuals and institutions have denounced the proposed regulation, including Senators (18), Congressmen (58) and Public Policy Organizations (35).  They are joined by many U.S. financial institutions []. [Link to full article below:]

July 15, 2003, Testimony Submitted by Andrew F. Quinlan to the Senate Finance Committee, Preserving America as an Attractive Location for International Capital: IRS's Interest Reporting Regulation Will Harm U.S. Economy


2) CF&P and PMLA to Hold Forum in Panama on Tax Competition and the OECD's Attack on Shipping Registries

The Center for Freedom and Prosperity will hold its third in a series of Tax Competition Forums in the Caribbean and Latin America on July 15, 2003. The seminar is co-sponsored by CF&P and the Panamanian Maritime Law Association and will start at 6:00 PM and be held at the Panamanian Bar Association Building, Panama City, Panama.

The Seminar will focus on the need to protect tax competition and what is being done to oppose the tax harmonization agenda of international bureaucracies such as the Organization for Economic Cooperation and Development (OECD) and the European Union (EU). The speakers will give updates on the OECD's "harmful" tax competition project, the EU's Savings Tax Directive and the US/Panama Tax Information Exchange Agreement. The seminar also will touch on a number of new issues, including the OECD's attempt to cripple global competition for business incorporation and the OECD's push to limit international competition for ship registration business.

         Event:       CF&P Tax Competition Forum

         Date:        Tuesday, July 15, 2003

         Location:  Panamanian Bar Associations Building, Panama City, Panama.
                             Mexico Avenue and 38th Street E, Salón Gregorio Miró

         Time:        6:00 P.M. to 7:30 PM

         Cost:          No Charge

Topics and Speakers:

1) Where Do We Stand in Washington . . . Tax Competition vs. Tax Harmonization?
         Andrew F. Quinlan
         President, Center for Freedom and Prosperity

2) Protecting Maritime Safety and Security, Instead of Protecting High Tax Nations
           Jill Keohane
         Chief of Corporate Division and In-House Counsel, Liberian International Ship &
         Corporate Registry

3) The Importance of Tax Competition in the Shipping Industry
         Juan Felipe Pitty C.
         President, Maritime Law Association

4) IRS's Interest Reporting Regulation:  Is it Good Tax Policy?
         Joel Mowbray
         Reporter for the National Review and a Nationally-Syndicated Columnist

5) *** Additional speaker to be announced


3)  CFP Hits Out At OECD Shipping Initiative


The Center for Freedom and Prosperity (CFP) has hit out at an OECD attempt to increase oversight of the global shipping industry.

In a review published by its Maritime Transport Committee in March, the OECD announced that:

'The study has found that it is very easy, and comparatively cheap, to establish a complex web of corporate entities to provide very effective cover to the identities of beneficial owners who do not want to be known...The most common and effective mechanisms that can provide anonymity for beneficial owners include bearer shares, nominee shareholders, nominee directors, the use of intermediaries to act on owners' behalf and the failure of jurisdictions to provide for effective reporting requirements.'

It continued:

'Open registers, which by definition do not have any nationality requirements, are the easiest jurisdictions in which to register vessels that are covered by complex legal and corporate arrangements. The arrangements will almost certainly cover a number of international jurisdictions which would be much more difficult to untangle.'

The CFP dismissed concerns that open shipping registries pose a security risk, arguing that the low-cost registries offered by jurisdictions such as Liberia, Panama, and the Bahamas provide 'vigorous and necessary competition to restrictive national registries'.

The think-tank went on to add that the OECD's treatment of shipping registries will be one of the major topics under discussion at its forthcoming Tax Competition Forum, which will be held in Panama on July 15. [Link to article below:]

July 3, 2003,, by Glen Shapiro, CFP Hits Out At OECD Shipping Initiative


4) Richard W. Rahn: Global greed screed


The European Commission and the OECD (Organization for Economic Cooperation and Development based in Paris) are reprimanding and threatening several political and economic entities with blacklisting or other sanctions because of their economic policies. You are probably thinking they are going after Fidel Castro of Cuba, Hugo Chavez of Venezuela, or the rulers of several African countries — all of whom have managed to greatly reduce the standard of living and liberties of their people while increasing misery and poverty.

No way. Instead, these European political leaders and bureaucrats have declared war on the political leaders and statesmen who brought their people record prosperity and economic opportunity, and upheld the rule of law and liberty.

According to new data just released by the World Bank, the six economies that have the highest per capita income (on a purchasing power parity basis) are: Luxembourg, Liechtenstein, the United States, Bermuda, Switzerland, and the Cayman Islands. These six entities are all free-market democracies. They are all characterized by providing a high degree of economic freedom and personal liberty for their people. They all provide strong protections for private property and have low levels of corruption, honest and independent judicial systems, relatively small black markets, and very low levels of poverty.

In a rational world, you would expect other countries to applaud and try to emulate the success of the "top six." Unfortunately, we live in a world of envy, corruption, and intellectual dishonesty. As a result, the "top six" are all under attack for engaging in the newly invented and oxymoronic "sin" of "unfair tax competition." Their crime, in the eyes of the international bureaucratic class, is that even though they have provided great prosperity and opportunity for their citizens, they have done so without the excessive taxation of the French and some of the other "old European" nations. [Link to full article below:]

July 3, 2003, The Washington Times, By Richard W. Rahn, Global greed screed


5) Cato: The New Europe Looks a Little Like `1984'


Europe recently paid homage to George Orwell, whose 100th birthday fell on June 25. Europe tipped its hat to Orwell in a different way as well. Orwell, of course, is famous for his writings about the rise of the totalitarian state in the name of a utopian ideal. Well, Europeans got a taste of that when the Financial Times uncovered a secret directive dreamed up by the European Commission's Social Affairs Commissioner Anna Diamantopoulou.

In the name of ending sexual stereotypes of men and women, she opined that some European media and advertising should be banned. In her grand scheme, the official arbiter of what are stereotypical portrayals of men and women would be the EC's Big Brothers and Sisters in Brussels, or, if necessary, the courts.

The secret draft was immediately denounced by a range of media groups that, according to the Financial Times, "reacted with disbelief" that the EC was considering censorship of television programming, mass media and advertising.

It also comes at a time when Europe considers its new Constitution and tries to envision what kind of a society it will become under a powerful new transnational political organization. Will Europe remain an open and free society? Or will it bend to politically correct directives from a Eurozone bureaucratic elite that "knows best" for its citizens?

This is the most disturbing context of the Diamantopoulou initiative. From one of its most powerful commissioners, we get a glimpse into the attitudes of Europe's ambitious, new, young post-war leaders. While the incident may be considered a "European affair," it does grab at the heartstrings of Americans who believe in free speech and oppose government censorship. It also can serve as a guide for Americans who want to understand Europe and see where it is heading. [Link to full report below:]

July 8, 2003, Cato Institute, by Richard Pollock, The New Europe Looks a Little Like `1984'


6) Marian L. Tupy: Socialism's Farewell Note


The proposed European Constitution represents the last gasp of European socialism. With its 260 pages and 70,000 words, it is one of the longest and most uninspiring farewell notes in human history. Like the Roman Emperor Diocletian, who tried to avert the demise of his weak and economically mismanaged empire by carving his absurd decrees in stone, Giscard D'Estaing and his fellow all-too-conventional "conventionalists" labored for months to codify Europe's venerated model of "social market economy." History suggests that their efforts will have been in vain.

There are two ways to deal with increasing competition: one is to become more productive and the other is to form a cartel. The first way encourages economic and social progress, while the second enforces the status quo. By creating the "United Fortress of Europe," the European Convention opted for the latter way of dealing with the forces of globalization.

The European decision-makers could have tackled the challenges of the new century by transforming the EU into a vibrant economic powerhouse. They could have liberalized the rigid European labor market, eased the weight of a plethora of high taxes and reduced the 97,000 pages of regulations.

Instead, they chose to withdraw behind a wall of high tariffs, buttressed by a panoply of subsidies and fortified by prohibitive labor and environmental standards. Worst of all, the prosperity of the European peoples will increasingly be subjected to the whims of a multitude of central planners in Brussels. [Link to full article below:]

July 2, 2003, Tech Central Station Europe, by Marian L. Tupy, Socialism's Farewell Note


7) Transparency International Report Slams UK Anti-Laundering Regime, Praises Dependencies

[Excerpt from LawAndTax-News]

Reporting on the latest study from international anti-corruption body, Transparency International (TI), the Jersey Evening Post on Wednesday welcomed the organisation's observations with regard to the Channel Islands.

Suggesting that the scope of the money-laundering problem in the United Kingdom is 'staggeringly large', and that around £18 billion is laundered through the country's banking system each year, the TI report's author - Gibraltar Financial Services Commission chairman, Marcus Killick - proceeded to heap praise on Crown dependencies such as Jersey and Guernsey, according to the JEP. [Link to full article below:]

June 27, 2003, LawAndTax-News, by Robin Pilgrim, Transparency International Report Slams UK Anti-Laundering Regime, Praises Dependencies

Additional article:

July 3, 2003, FD-Centre, Dirty London has no need for laundering

July 2, 2003, Evening Standard, by Malcolm Withers, Money-laundering 'swamping City

July 2, 2003, FD-Centre, Laundering taskforce launched


8) Kevin A. Hassett: Spending with the Best of 'Em:  The Current President Is No Tightwad--Unfortunately


In the 2000 Republican primary, Steve Forbes told voters that they should reject George W. Bush because he was too liberal. He backed up his claims with statistics showing that government spending in Texas had increased by 36 percent while Bush was governor. The increase, Forbes noted, was twice that accomplished by the Clinton administration. Forbes added that Bush "talks like a conservative but he governs like a New Democrat."

Statistics generated by a political campaign should always be viewed skeptically, and Forbes certainly presented the Texas numbers with a view toward maximizing their shock value. But the charge that Mr. Bush is not wholeheartedly committed to the Republican ideal of a lean government can now be evaluated against more data. The facts are striking, and they make Mr. Forbes's warnings look prescient.

Under the current Bush budget, federal spending will have increased by 19.6 percent over the first three years of the administration. Since government spending is growing much faster than the economy as a whole, the share of our national income devoted to Leviathan has increased markedly, from 18.4 percent to 19.9 percent. Cato Institute economist Veronique de Rugy notes that this dramatic surge is virtually unprecedented in the history of government spending in the U.S. According to de Rugy's research, three of the five biggest increases in government spending in history have all occurred during the first three years of the Bush administration; the other two occurred during the Second World War. That sounds pretty bad, but even these numbers undoubtedly understate the problem, since they do not account for the huge prescription-drug benefit President Bush is working hard to push through Congress. [Link to full article below:]

June 30, 2003, American Enterprise Institute, By Kevin A. Hassett, Spending with the Best of 'Em: The Current President Is No Tightwad--Unfortunately

Additional Articles:

June 30, 2003, The Washington Times, By Donald Lambro, Spending growth upsets conservatives

June 30, 2003, The New York Times, By Adam Nagourney, Bush Looking to His Right To Shore Up '04 Support 482


9) NYT:  U.S. Suspends Aid to 35 Countries Over New International Court


The Bush administration suspended all American military assistance to 35 countries today because they refused to pledge to give American citizens immunity before the International Criminal Court.

The administration warned last year that under a provision of the new American antiterrorism law, any country that became a member of the new court but failed to give exemptions to Americans serving within its borders would lose such aid.

That includes training programs as well as financing of weapons and equipment purchases.

Many of the countries affected, like Colombia and Ecuador, are considered critical to the administration's efforts to bring stability to the Western Hemisphere. Others, like Croatia, are preparing to join NATO and were counting on American help to modernize their armed forces.

Officials said that in all, $47.6 million in aid and $613,000 in military education programs would be lost to the 35 countries.

The new court is the world's first permanent forum for putting on trial people charged with genocide and other crimes against humanity. The administration strongly opposes it on the ground that Americans could be subjected to politically motivated prosecutions.

"There should be no misunderstanding, that the issue of protecting U.S. persons from the International Criminal Court will be a significant and pressing matter in our relations with every state," Ari Fleischer, the White House spokesman, said today. Link to full article below:]

July 1, 2003, The New York Times, By Elizabeth Becker, U.S. Suspends Aid to 35 Countries Over New International Court


10) Cato:  Reasonable Doubt: The Case Against the Proposed International Criminal Court

[Executive Summary of the 1998 Report]

In July 1998 representatives of governments and nongovernmental organizations will conclude a five-week international conference in Rome aimed at producing a treaty establishing the International Criminal Court. The stated mission of the proposed ICC is to prosecute persons charged with the most serious international crimes, such as war crimes, crimes against humanity, and genocide. With 116 articles and more than 200 wording options to be debated, however, the ICC's draft statute is replete with unresolved issues and alarming possibilities.

Specifically, the court threatens to diminish America's sovereignty, produce arbitrary and highly politicized "justice," and grow into a jurisdictional leviathan. Already some supporters of the proposed court want to give it the authority to prosecute drug trafficking as well as such vague offenses as "serious threats to the environment" and "committing outrages on personal dignity." Even if such expansive authority is not given to the ICC initially, the potential for jurisdictional creep is considerable and worrisome. Moreover, it appears that many of the legal safeguards American citizens enjoy under the U.S. Constitution would be suspended if they were brought before the court. Endangered constitutional protections include the prohibition against double jeopardy, the right to trial by an impartial jury, and the right of the accused to confront the witnesses against him.

For those and other reasons, the U.S. Senate and U.S. House of Representatives should have sufficient grounds to, respectively, refuse to ratify and to fund the International Criminal Court. If Congress goes ahead with the treaty, it could open a Pandora's box of legal mischief and political folly. [Link to full report below:]

July 16, 1998, Cato Institute, by Gary T. Dempsey, Reasonable Doubt: The Case Against the Proposed International Criminal Court


11) CF&P Clips

July 8, 2003,, by Leroy Baker, US Economy To Rebound On Tax Cuts, Experts Suggest

July 8, 2003, Expatica, It's reform or bust, OECD tells France,313,&item_id=32630

July 8, 2003,, by Ulrika Lomas, EU Sanctions On US Goods Unlikely Says Lamy

July 8, 2003, Expatica, by Graham Tearse, Whither France?,359,&item_id=32580

July 7, 2003, The Miami Herald, By Christina Hoag, New passport rules for foreigners

July 7, 2003,, Swiss back banking secrecy,,2-8-25_1384050,00.html

July 6, 2003, The New York Times, By David Cay Johnston, I.R.S. Takes Aim at Big Shelters and Hopes Message Filters Down

July 5, 2003, The Scotsman, By Tom Parfit, The secret life of Russia's millionaires

July 1, 2003, BBC News, Germany 'heading for recession'

June 30, 2003,, by Mike Godfrey, Corporate Tax Reforms Too Slow Says Think Tank

June 29, 2003, The Observer, by Conal Walsh, Jersey locals in revolt over bid to keep offshore status: The haven's removal of all business taxes would hit consumers hard,6903,987043,00.html

June 28, 2003, The Guardian (London), Why rules won't wash on money laundering,3605,986231,00.html

June 27, 2003, LawAndTax-News, by Robin Pilgrim, Transparency International Report Slams UK Anti-Laundering Regime, Praises Dependencies


Best regards,

Andrew Quinlan
Center for Freedom and Prosperity


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