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Center for Freedom and Prosperity's E-mail Update 1) Washington Update: Driving a Stake Through the Heart of Tax Harmonization 2) CF&P Strategic Memo Hails Defeat of EU Savings Tax Cartel 3) CF&P Continues Campaign Against Illegal IRS Regulation 4) CF&P Press Release: Coalition Applauds Thomas' International Tax Reform Proposal: Urges Chairman to Drop Inversion Moratorium and Tax Increase on Foreign Companies' U.S. Operations 5) Mitchell: Editorial Blasts IRS Regulation 6) Financial Times: LEX Column -- Corporate inversions 7) ITIO's & STEP's Study Shows Hypocrisy of the O.E.C.D. 8) Thompson asks that No Corporate Inversion Amendments Be Added to FY 2003 Appropriations Bills 10) Rep. Istook Introduces Tax Bill to Help Investors 12) Economic Freedom Leads to Prosperity 13) John Berlau: Tax-Code Trauma 14) CF&P Clips 1) Washington Update: Driving a Stake Through the Heart of Tax Harmonization For the last two years CF&P has been working with many of our friends to educate and influence lawmakers and policymakers in Washington on why tax competition is beneficial for the U.S. and other free-market countries. We think our efforts have had an enormous impact. To use a sports metaphor, we are in the closing minutes of our game and we can taste victory. CF&P pledges to continue to work hard to make sure our opponents are unable to resuscitate the EU Savings Directive. We are determined to derail the new proposed IRS regulation. And we will fight to reform America's uncompetitive international tax law – and fight to preserve the right to expatriate if politicians do not make needed reforms. But we need your help. Speak out against these proposals and let your elected officials know where you stand. Regards, AQ NOTE: My e-mail files were lost. Please contact me if you have an outstanding request with me (i.e. meeting, phone call, interview, article request, etc. . .). Thank you.
2) CF&P Strategic Memo Hails Defeat of EU Savings Tax Cartel The most recent CF&P Strategic Memo provides an up-to-date explanation of the political infighting that led the America's rejection of the EU Savings Tax Directive. The Center will vigorously work
to ensure that Treasury and IRS bureaucrats do not undermine the White House's correct decision. [Link to full memo below:] News Clips: August 28, 2002, Tax-News.com, by Mike Godfrey, CFP Reaction To US Information Sharing Plans Mixed August 12, 2002, Tax-News.com, by Mike Godfrey, Taxpayers' Union Director Attacks EU Information-Sharing Regime July 20, 2002, Financial Times, by Luis Suarez-Villa, Letters To The Editor: Wrong way to tackle EU's tax evaders
3) CF&P Continues Campaign Against Illegal IRS Regulation The IRS's new regulation is old garbage in a new wrapper. The only difference between the new regulation and the original regulation is that the new regulation targets 15 specific countries. But even this difference is meaningless since the IRS is already hinting that the rest of the world's countries will be added to the list within two or three years. CF&P was a leader in killing the Clinton regulation and we will work just as hard over the next few months to knock-off its mutant sibling. We are determined to win, especially since the EU bureaucrats will try to mischaracterize the IRS regulation as a sign of support for the Savings Tax Directive (by claiming it is an "equivalent measure"). The EU is making this claim, even though Kenneth Dam, Deputy U.S. Treasury Secretary, sent a letter July 31 to the European Union and stated: "There is no linkage with the EU Savings Directive and our actions should not be considered to anticipate the outcome of the technical discussions regarding the proposed EU Savings Directive that we agreed in May should continue. Indeed, any suggestion that our action here anticipates eventual support for the proposed EU Savings Directive could adversely affect the technical-level discussions." While we think it is good that Mr. Dam made these comments and denied linkage, we notice that the Treasury Department bureaucrats who drafted the letter made it appear that the United States was still considering the Savings Tax Directive. Yet as the Strategic Memo mentioned above explains, the White House already has rejected the ill-advised proposal. This is why the Center's continuing work is so important. Important Links: Letter from U.S. Treasury to the European Union, July 31, 2002 CF&P Dedicated Web Page: Dump the IRS Info Sharing Reg Coalition Rejects "Clinton-Lite" IRS Regulation; Urges Administration to Rein in Treasury Bureaucracy August 6, 2002, The Bureau of National Affairs, Criticism Continues for Narrowed Proposal On Nonresident Alien Interest Reporting August 1, 2002, Tax-News.com, by Mike Godfrey, US Treasury Warms Over Clinton-Era Bank Interest Tax Rules August 20, 2002, The Jersey Evening Post, by Christine Herbert, Island hit by US tax blow August 21, 2002, Tax-News.com, by Jason Gorringe, Jersey's Finance Centre Disappointed By US Tax Compromise
4) CF&P Press Release: Coalition Applauds Thomas' International Tax Reform Proposal: Urges Chairman to Drop Inversion Moratorium and Tax Increase on Foreign Companies' U.S. Operations [Excerpt:] August 29, 2002, CF&P Press Release: Coalition Applauds Thomas' International Tax Reform Proposal: Urges Chairman to Drop Inversion Moratorium and Tax Increase on Foreign Companies' U.S.
Operations Coalition letter to Chairman Thomas: News Clips: August 30, 2002, Tax-News.com, US Organisations' Critique Of Bill Thomas's Tax Proposals
5) Mitchell: Editorial Blasts IRS Regulation [Excerpt] But perhaps he should spend more time at home. In particular, he needs to provide some adult supervision at the Internal Revenue Service, which seems intent on enhancing its bad reputation. Its heavy-handed tactics and disregard for civil liberties are so legendary . . . . . . The most recent IRS outrage is a proposed regulation that would require U.S. banks to report how much interest they pay depositors from 15 nations, including France and Germany. But this attack on financial privacy is completely unnecessary: The IRS admits this information isn't needed to enforce U.S. tax law and is being requested solely for the benefit of foreign governments. It's clear, though, that the regulation could cause significant damage. For instance, it would: … Make it harder for Americans to get loans … Hurt American financial markets … Disregard existing law … Hinder tax reform … [Link to full article below:] August 20, 2002, The Washington Times, by Daniel J. Mitchell, IRS at play while O'Neill is away Additional News Clips: August 21, 2002, , Tax-News.com, by Jason Gorringe, Jersey's Finance Centre Disappointed By US Tax Compromise August 2, 2002, South Florida Business Journal, by Jim Freer, Lobbyists help get Latin America a tax exclusion
6) Financial Times: LEX Column -- Corporate inversions [Excerpt] But the notion that it is unpatriotic for companies to minimise their tax bills is nonsense, and invoking September 11 in this context is shameful. The US is one of a handful of countries that taxes the overseas profits of domestic companies. Companies serving their shareholders have a legitimate interest in incorporating abroad and Bermuda-based companies still pay taxes on profits from their US operations. Tax competition should encourage the US to modernise its corporate taxation. Moreover, for Stanley to give up a plan that could have saved it Dollars 30m a year in taxes has implications for the company's shareholders, employees and customers. Anyone who does not understand that individuals, not companies, pay taxes needs a basic economics class. Politicians should stop demonising companies that incorporate offshore. If not, Delaware politicians should start to worry. It is not because of the weather and the Wilmington civic centre that half the companies listed on the New York Stock Exchange are incorporated in one state. August 3, 2002, Financial Times, LEX COLUMN: Corporate inversions Additional Inversion Clips: August 27, 2002, The Royal Gazette, By Magnus Henagulph, Patriot' tax controversy: Tax debate flares in US again August 26, 2002, The Royal Gazette, These loopholes are much misunderstood, by James Paul Sabo August 21, 2002, Washington Post, by Jonathan Weisman, Patriotism Raining On Tax Paradise: Lawmakers Are Chafing at Firms That Exist Offshore Only on Paper August 21, 2002, The Royal Gazette, by Cathy Duffy, Why Stanley Works is no loss to Bermuda August 18, 2002, United Press International, By James C. Bennett, Anglosphere: Regulatory arbitrage August 13, 2002, The New York Times, By David Cay Johnston, Officials Of 14 States Pledge Protection Of Pension Assets August 12, 2002, Tax-News.com, by Mike Godfrey, US Pension Funds May Shun Companies That Move Offshore August 12, 2002, National Center For Policy Analysis, Preventing Corporate Inversions Isn't Congress's Business August 12, 2002, The Washington Times, by Bruce Bartlett, Fueling flight of the inversions August 10, 2002, The New York Times, By Alison Mitchell, Companies Use Ex-Lawmakers in Fight on Offshore Tax Break August 9, 2002, Tax-News.com, by Mike Godfrey, US States Target Tax-Avoiding Corporations August 7, 2002, The News-Press (Fort Myers, FL), Dixie Sunshine: Corporations voting against taxes August 8, 2002, Business Week Online, By Diane Brady, COMMENTARY: The Hidden Perils of Offshore Tax Havens
7) ITIO's & STEP's Study Shows Hypocrisy of the O.E.C.D. A new study warns that, by overlooking its own member states, the Organization for Economic Cooperation and Development (OECD) is failing to tackle effectively the use of corporate entities for illicit purposes. The study also finds that the OECD Report could significantly undermine the position of the offshore centers and jeopardize personal privacy. The study, Towards a Level Playing Field reveals that, by focusing on finance centers in smaller and developing countries, the OECD is ignoring potential problems in much larger OECD finance centers and corporate domiciles. OECD countries control most of the global trade in financial services for non-residents. The OECD produced a Report entitled "Behind the Corporate Veil: Using Corporate Entities for Illicit Purposes" in late 2001, proposing mechanisms to track beneficial ownership and control information for corporate vehicles (broadly defined to include trusts and partnerships). OECD's goal is to ensure that such information is available to countries wishing to scrutinize the financial affairs of their citizens. The OECD Report focuses on "offshore" jurisdictions, despite the fact that such jurisdictions did not participate in drafting the Report. International law firm Stikeman Elliott authored a response entitled "Towards a Level Playing Field" for the International Tax and Investment Organization (ITIO), a grouping of offshore governments, and the Society of Trust and Estate Practitioners (STEP) to respond to OECD. Stikeman Elliott prepared a series of tables, appearing in the appendices, which show that OECD member countries now significantly lag the offshore centers in their regulatory regimes. The Stikeman Elliott report calls for a universal forum for consideration of enhanced regulation for international financial centers, a level playing field and proper regard for personal privacy. FATF has relied heavily on OECD's research in their "Consultation Paper on the Review of the FATF Forty Recommendations". OECD is also using their Report as a foundation for their own work in this area. Without comment to correct the skewed view of OECD (i.e. which protects the commercial sensitivities of their own member states) the OECD Report could significantly undermine the position of the offshore centers and jeopardize personal privacy. The ITIO has requested comments on the Stikeman Elliott report linked below. [A link to a press release and report can be found on the ITIO's web page: http://www.itio.org/] News Clip: August 7, 2002, Tax-News.com, STEP and ITIO Issue Study Critical of OECD http://www.tax-news.com/asp/story/story.asp?storyname=9005
8) Thompson asks that No Corporate Inversion Amendments Be Added to FY 2003 Appropriations Bills Senate Committee on Governmental Affairs Ranking Member Fred Thompson (R-Tenn.) Letter to Senate Appropriations Committee Chairman Robert Byrd (D-W. Va.) and Ranking Member Ted Stevens (R-Alaska)
Asking that No Corporate Inversion Amendments Be Added to FY 2003 Appropriations Bills. [Link to full letter below:] [Excerpt from letter] Denying a company the ability to be awarded Federal contracts based solely on its location represents a significant change in Federal procurements policy and counteracts years of work to streamline the Federal acquisition process so that the U.S. Government and its citizens receive the best return on their investment. If we begin to use Federal contracts as leverage against potential contractors, the system will inevitably become highly politicized and the goal of attaining the best value on contracts will no longer be a priority. I am also very concerned about banning companies from Federal work who incorporated offshore for legitimate business seasons prior to legislation being passed. A procurement "debarment" is a serious sanction, reserved for egregious conduct, such as fraud or criminal offences in connection with obtaining or performing a public contract.
9) Bush Administration Warned about the Pitfalls of the Proposed European Union Value-Added Tax on Digital Goods Letter by House Energy and Commerce Subcommittee on Commerce, Trade and Consumer Protection Members to Treasury Secretary Paul O' Neill, U.S. Trade Representative Robert Zoellick, and
Commerce Secretary Donald Evans Regarding Proposed European Union Value-Added Tax on Digital Goods. [Link to full letter below:] [Excerpt from letter] Denying a company the ability to be awarded Federal contracts based solely on its location represents a significant change in Federal procurements policy and counteracts years of work to streamline the Federal acquisition process so that the U.S. Government and its citizens receive the best return on their investment. If we begin to use Federal contracts as leverage against potential contractors, the system will inevitably become highly politicized and the goal of attaining the best value on contracts will no longer be a priority. I am also very concerned about banning companies from Federal work who incorporated offshore for legitimate business seasons prior to legislation being passed. A procurement "debarment" is a serious sanction, reserved for egregious conduct, such as fraud or criminal offences in connection with obtaining or performing a public contract.
10) Rep. Istook Introduces Tax Bill to Help Investors Congressman Ernest Istook (R-OK introduced a bill to reduce the tax bias against American investors. The bill would increase the deductibility of capital losses from $3,000 to $20,000 per year. . .
"This bill will provide immediate relief to those Americans hit hardest by the market downturn," said Istook. "Instead of waiting 8 or 10 years, families can start recovering now. It also helps keep investors from
being discouraged. Long-term, investing in America is good for individuals and good for our country. We don't want the short-term losses in times like this to discourage people from continuing to invest in whatever
they think is most prudent." Link to full announcement below:
11) CSE: It's the Tax Code, Stupid: American companies are fleeing a corporate tax code that is too high and anti-business [Excerpt] Just recently, Stanley Works, the American toolmaker, was cowed into abandoning a plan to re-incorporate in Bermuda in order to reduce its tax liability. There is nothing illegal about this; in fact, Stanley Works' rivals had already done so, leaving the company at a serious competitive disadvantage. The move was not a threat to American jobs, because the company's factories and actual headquarters in the United States would not be affected. If anything, the political push to quash the move poses a real threat to the long-term viability of the company and the jobs it creates. The more fundamental problem lies in the U.S. tax code and its treatment of business in a global economy. It is complex, unfair, and generates benefits for some while hurting others. If politicians were truly concerned about economic growth rather than re-election, they would focus on this larger problem that poses a significant threat to economic growth. The federal tax code is arcane and riddled with loopholes and special interest clauses for favored constituents. It has become burdensome and incomprehensible. No one in Congress can understand the totality of the tax code, and this is just as true for the business world. The complexity invites creative accounting, as businesses divert resources away from productive activities and toward efforts to minimize their tax burden. The tax code's thousands of pages leave many gray areas, and tax lawyers and accountants are paid handsomely to mine these areas for loopholes and exemptions. [Link to full article below:} August 7, 2002, Citizens for a Sound Economy, By: Wayne T. Brough, Ph.D., It's the Tax Code, Stupid: American companies are fleeing a corporate tax code that is too high and anti-business.
12) Economic Freedom Leads to Prosperity Study shows that economic freedom and the resulting economic prosperity, not oppressive government taxation and regulation, represent the best hope for the poor and the environment alike. [Excerpt] The most economically free nation in the world remains Hong Kong, followed by Singapore and the United States. The rankings of other major economies are the United Kingdom (4th), Canada (8th), Germany (15th), Japan (24th), Taiwan (30th), France (38th), Mexico (66th), and India (73rd). Most of the lowest-ranked nations are in Africa and Latin America. Botswana has the best record for an African nation, tied for 38th with six other nations including France and South Korea. Chile, with the best record in Latin America, was tied with three other nations at 15th. Three former communist countries are in the bottom 10: Russia (116th), Ukraine (119th), and Romania (114th) all did worse than communist China (101st). Data for North Korea and Cuba are not available. The study also shows that economic freedom is strongly linked with both higher levels of income and faster rates of economic growth. The people living in the top one-fifth of the most free countries enjoy an average income of $23,450 and a growth rate in the 1990s of 2.56% per year; in contrast, the bottom one-fifth in the rankings had an average income of just $2,556 and a -0.85% growth rate in the 1990s. July 12, 2002, National Review Online, by Robert A. Lawson, The Safety Net of Freedom: Better to be poor in a rich country, than poor in a poor one.
13) John Berlau: Tax-Code Trauma [Excerpt] But some experts say no matter how many new regulations are passed, or how many penalties are imposed, accounting for corporate transactions will remain all but completely opaque because of the incredible complexity and burdensomeness of the U.S. tax code. "Because the corporate income tax is so complicated, companies are forced to go to the Pricewaterhouses to help them set up complicated structures to minimize their taxes," says Chris Edwards, director of fiscal-policy studies at the libertarian Cato Institute and former senior economist at the congressional Joint Economic Committee. "The way companies structure themselves around the world with various tiers of subsidiaries of subsidiaries of subsidiaries and partnerships, and this sort of thing, is because the tax code drives them to do that to minimize their taxation, and that makes it very difficult for investors to figure out how a company is structured." [Link to full story below:] July 22, 2002, Insight on the News Magazine, By John Berlau, Tax-Code Trauma
September 2, 2002, Tax-News.com, , by Ulrika Lomas, The WTO Approves Proposed EU Sanctions Against US September 2002, Ashcroft Watch, Nat Hentoff, The Terror of Pre-Crime August 30, 2002, Associated Pres, By Naomi Koppel, WTO Allows EU's Sanctions on U.S. August 29, 2002, The New York Times, IRS Wants Wider Credit Card Probe August 27, 2002, Star Tribune, By Shira Kantor, Federal government's bookkeeping needs fixing, too August 26, 2002, Insight Magazine, By Kelly Patricia O'Meara, Losing the War for Civil Liberties August 21, 2002, Tax-News.com, by Mike Godfrey, US Retailers Up In Arms About EU Digital VAT Plan August 20, 2002, The Guardian, by Richard Norton-Taylor and Stuart Millar, Privacy fear over plan to store email: EU wants data retained to help fight against crime August 19, 2002, Tax-News.com, by Mike Godfrey, IRS Seeks Access To More Records In Offshore Credit Card Probe August 19, 2002, The Washington Times, by Bruce Bartlett, Addressing the tax increase bias August 14, 2002, Tax-News.com, by Robert Lee, CNI Chief Accuses EU Enlargement Commissioner Of 'Blackmail' August 14, 2002, The Washington Times, By Richard W. Rahn, Punishment with widening ripples August 14, 2002, The Washington Times, By Ben Barber, U.S. accuses EU of jawboning nations August, 14, 2002, BBC News, OECD: What is it and what does it do? August 13, 2002, Tech Central Station, by James K. Glassman, Buy Europe or Bye Europe? August 12, 2002, Tax-News.com, by Jason Gorringe, UK Appoints New Minister For The Channel Islands August 12, 2002, The Christian Science Monitor, By Abraham McLaughlin, States raise taxes and boost fees to fill gaps: Worst budget woes in 10 years bring hikes in such things as 'sin' taxes
and car fees. August 9, 2002, Tax-News.com, by Mike Godfrey, US States Target Tax-Avoiding Corporations August 7, 2002, Wired.com, By Eliot Borin, Feds Open 'Total' Tech Spy System August 6, 2002, The Washington Times, by Richard W. Rahn, Pursuit of economic literacy http://www.washtimes.com/commentary/20020806-20185124.htm July 26, 2002, The Washington Times, By Richard W. Rahn, Outside view: Good numbers, bad standards June 26, 2002, Cato Policy Analysis No. 443, by Timothy Lynch, Breaking the Vicious Cycle Preserving Our Liberties While Fighting Terrorism
Best regards, Andrew Quinlan Did you like what you just read? If so, consider contributing to the Center for Freedom and Prosperity at: Do you have a friend who might be interested in our e-mails? If so, forward it to them, or have them join our list at:
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