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Center for Freedom and Prosperity's E-mail Update 2) CF&P Strategic Memo: The Impact of the U.S. Elections on Tax Competition 3) Don Manzullo: House Small Business Committee Chairman Strongly Opposes IRS Interest Reporting Rule 4) We Need Your Help: Stop IRS Regulatory Abuse 6) Dan Mitchell explains Europe's cult-like worship of multi-lateralism 7) For your reading pleasure: A left-winger has a temper tantrum. . . 8) UK lawyer reveals improper nature of OECD attack on low-tax jurisdictions 9) Robert Stewart: The Moral Case For Tax Havens 10) Michael O'Brien: The OECD: A Supranational Tax Authority? 11) The Income Tax: Root of all Evil 12) Walter Williams: Economic Asininities 13) Richard Rahn: Growth and Envy 15) CF&P Clips The past week was very exciting here in Washington. The mid-term elections have changed the outlook and make-up of Congress. CF&P's Strategic Memo below discusses this shake-up and summarizes the effect on our major issues. We should be able to make progress since most Republicans are more sympathetic to tax competition, tax reform and smaller government, but it also is likely that the left will intensify its opposition. The bottom line is that we have an opportunity, but it will require hard work to reap any benefits. Make sure you read the strategic memo below to get the full story on this historic election. The update is filled with more big news. Another senior member of Congress, for instance, comes out strong against the IRS's interest reporting rule. The Heritage Foundation's president asks Treasury Secretary Paul O'Neill to reject the EU Savings Tax Directive and IRS regulation. Every week I receive many interesting reports and studies from all over the world. In this update I feature several of these, including: Paul Baxendale-Walker, who discusses the flagrant abuses inherent in the OECD "harmful tax competition" initiative; Robert Stewart on the "The Moral Case For Tax Havens;" Michael O'Brien on "The OECD: A Supranational Tax Authority?;" a Harvard Business School report written by Mihir A. Desai entitled, "Are We Racing to the Bottom? Evidence on the Dynamics of International Tax Competition;" and a 48-year old classic essay on state confiscation of wealth by Frank Chodorov, "The Income Tax: Root of all Evil." Also please don't forget to contact the IRS and object to their interest reporting regulation (see below for how to contact the IRS). The deadline is next Thursday (14th). Please make sure to ask your friends, co-workers and family to comment as well. Regards, AQ
2) CF&P Strategic Memo: The Impact of the U.S. Elections on Tax Competition The 2002 mid-term election produced an unexpected Republican victory. The GOP was expected to hold the House of Representatives, but few expected Republicans to win control of the Senate. This dramatic shift will have important implications for the global battle to preserve tax competition. Republican control of the Senate is important for several reasons. A GOP majority, for instance, means greater control of the political process. Republicans will now run all
Senate Committees, including the Senate Banking Committee and the Senate Finance Committee. And while not all Republicans are firm supporters of tax competition,
financial privacy, and fiscal sovereignty, they almost always are better on these issues than the Democrats they replace. Republican control also makes it easier to block bad
legislation, either by bottling it up in Committee or by controlling the Senate schedule. Needless to say, the GOP also will have the votes at least in theory to win floor
fights. [Link to full Strategic Memorandum:] News Clip: November 8, 2002, Tax-News.com, Republican Win Positive For Tax Competition, Says Washington's CFP
3) Don Manzullo: House Small Business Committee Chairman Strongly Opposes IRS Interest Reporting Rule Illinois Congressman Don Manzullo, Chairman of the House Small Business Committee, sent a letter seeking the withdrawal of the proposed Internal Revenue Service regulation that would require the reporting of bank deposit interest paid to nonresident aliens. Rep. Manzullo stated that that the proposed rule " is a misuse of the regulatory process and is in direct conflict with America's economic interests." Manzullo, a champion for small business, warns that the regulation will chase away capital, money that is needed in America for the creation and expansion of small businesses. [Link to full release and letter below:] CF&P Press Release: Link to Rep. Manzullo's letter: CF&P's dedicated web page on withdrawing the proposed IRS regulation. http://www.freedomandprosperity.org/update/irsreg/irsreg.shtml
4) We Need Your Help: Stop IRS Regulatory Abuse -- Don't Let the Bureaucrats Undermine President Bush Please contact the IRS by Thursday, November 14, and let them know you disagree with the proposed regulation (REG-133254-02) that requires U.S. banks to report to the IRS the amount of bank deposit interest paid to foreign depositors, even though the IRS admits that this information is not needed to enforce U.S. tax law and is being requested solely for the benefit of foreign governments. The proposed regulation is based on a similar regulation (REG-126100-00) proposed during the final days of the Clinton Administration. The only significant difference is that the original Clinton regulation required reporting on all foreign depositors, whereas the latest proposal targets residents of 15 major nations. We need your help to defeat the IRS! The IRS is required to accept letters and e-mails from the public during a "comment period." If there is sufficient opposition, they will be forced to withdraw their scheme. Indeed, the IRS already has been forced to modify the original Clinton regulation because of heated opposition from the American people. There are two main arguments you can use when submitting your public comment: 1. The IRS is abusing its regulatory authority by trying to overturn existing law. Congress approved favorable tax and privacy rules for foreign depositors to attract capital to the American economy. The IRS has no legal authority to overturn this policy. 2. The regulation will harm the U.S. economy by causing money to flee American banks. Foreigners will take their deposits to other nations, and this will mean less capital for car loans, home mortgages, and small business expansion. Register your Objection to Proposed Regulation Online with the IRS Or mail you comments to: Alexandra K. Helou See CF&P's dedicated web page on this IRS Info Sharing Regulation for more information
5) Heritage Foundation's President condemns tax harmonization, asks Treasury Secretary O'Neill to explain the U.S. position on the EU Savings Tax Directive Tax competition is a liberalizing force in the world economy. The mobility of resources -particularly capital - encourages politicians to lower tax rates and implement pro-growth tax reforms. This is why market-oriented organizations such as The Heritage Foundation are ardent opponents of tax harmonization initiatives like the OECD "harmful tax competition" initiative and the EU "savings tax directive." Simply stated, the United States has little to gain and much to lose if international bureaucracies impose automatic information-sharing requirements on jurisdictions that benefit from global capital flows. [Link to full letter:] September 10, 2002, The Heritage Foundation, Edwin J. Feulner's letter to Treasury Secretary Paul O'Neill on Global Tax Competition
Additional Clips on the European Union Savings Tax Directive November 6, 2002, Tax-News.com, by Ulrika Lomas, EU Proposes Tax Amnesty To Force Switzerland Into Savings Tax Plan November 5, 2002, Telegraph (London), By Selina Mills, Switzerland barricades against sharing banking information November 5, 2002, Tax-News.com, by Ulrika Lomas, EU To Face Imminent Collapse Of Information Sharing Plans November 5, 2002, Tax-News.com, by Ulrika Lomas, Ireland And UK Blocking EU Tax Harmonisation Plans November 5, 2002, Ananova (AFX News), ECOFIN Savings tax deal at risk if automatic information swap sought - Grasser November 4, 2002, Swissinfo, by Claudia Spahr, Swiss and British lock horns over banking secrecy November 4, 2002, Tax-News.com, by Ulrika Lomas, EU To Undertake Coordinated Tax Evasion Clampdown October 31, 2002, OpinionJournal.com, By Dan Lewis, Channel 'Tea Party' Forces British Tax Retreat
6) Dan Mitchell explains Europe's cult-like worship of multi-lateralism. [Excerpt:] But this is not just a matter of self-interest. Having just spent two of the last three weeks in Europe, I believe Europeans have adopted an almost cultlike worship of multilateralism. To Europe's bureaucratic elite, a policy is automatically correct if it is the product of international discussions, especially if the negotiations take place under the auspices of an international organization. Because of this multilateralist mindset, there is almost no effort to defend or justify policies that result from international discussions. Indeed, those who try to discuss whether these policies are desirable are treated as heretics because the European elites interpret open debate as an attack on the sacred process of multilateralism. Relations between Europe and the United States have soured because European politicians and bureaucrats instinctively and reflexively oppose the concept of national sovereignty. To these self-anointed elites, the United States is acting like an international outlaw because America has the gall to make unilateral decisions. [Link to full article below:] November 7, 2002, The Washington Times, by Daniel J. Mitchell, European cult of multilateralism
7) For your reading pleasure: A left-winger has a temper tantrum to protest the battle against the IRS bank deposit regulation. [Excerpt:] The banking industry and right-wing taxaphobes were apoplectic. So was Florida Gov. Jeb Bush, whose no-income-tax state harbors a large share of the tax-free deposits. They all looked to the new management at the White House to kill the proposal. [Link to full article below:] November 18, 2002, The American Prospect, By Robert S. McIntyre, The Taxonomist: The Tax Cheaters Lobby: How the banking industry and the right foment tax evasion
8) UK lawyer reveals improper nature of OECD attack on low-tax jurisdictions. Presenting at the Conservative Party's annual conference, Paul Baxendale-Walker discusses the flagrant abuses inherent in the OECD "harmful tax competition" initiative.
This is a must-read. As Mr. Baxendale-Walker properly states: "'Appeasement never purchases liberty. It merely sells freedom at a discount. And the OECD, like any
aggressor who is not resisted, will be back for more." [Link to full speech below:] News Clip: October 16, 2002, Tax-News.com, by Robert Lee, UK Tories Urge Dependent Territories To Stand Up To OECD
9) Robert Stewart: The Moral Case For Tax Havens [Excerpt:] . . . Those who value individual freedom over government benevolence (or should that be malevolence) seek to protect their assets and their privacy from prying eyes, but they are usually portrayed as greedy selfish barons who neglect their responsibilities to those at home. Whilst most of the tax avoiders do not act from altruistic motives, it is relevant to recall that Joseph Schumpeter in his essay "The Fiscal State" pointed out that one of the consequences of the unlimited power of governments to tax their citizens would be a misallocation of resources away from wealth producing investments and into largely non-productive public spending designed to redistribute income or the building of public monuments. The Declaration of Independence put it more succinctly when it said of King George III that: "He has erected a multitude of new offices, and sent hither swarms of officers to harass our people and eat out their substance." The most important activity of the misnamed tax havens is to avoid governmental unproductive spending and to allow entrepreneurs freely to invest and produce the goods and services needed for the world to prosper. [Link to full article below:] October 30, 2002, LewRockwell.com, by Robert Stewart, The Moral Case For Tax Havens
10) Michael O'Brien: The OECD: A Supranational Tax Authority? When investors go abroad in search of lower tax rates, their home countries seldom respond by lowering taxes and preventing the loss of further capital. However, to the consternation of some governments, there is a movement underway to do just the opposite. At the forefront of this movement is the Paris-based Organisation for Economic Cooperation and Development (OECD), which advocates creating a centralised bureaucracy to levy and monitor taxes worldwide and, presumably, eliminate tax competition. But should organisations less accountable than democratically elected governments be granted the power to dictate sweeping tax policies? And would the the OECD's plans dilute national sovereignties and individual privacy? [Link to full article below:] 2002 PricewaterhouseCoopers, The OECD: A Supranational Tax Authority?, by Michael O'Brien
11) The Income Tax: Root of all Evil The Sovereign Society's Offshore A-Letter brought this 1954 Frank Chodorov classic essay on state confiscation of wealth to our attention (http://www.sovereignsociety.com). [Excerpt] Tradition has a way of hanging on even after it is, for all practical purposes, dead. We in this country still use individualistic terms-as, for instance, the rights of man-when, as a matter of fact, we think and behave in the framework of collectivistic doctrine. We support and advocate such practices as farm-support prices, social security, government housing, socialized medicine, conscription, and all sorts of ideas that stem from the thesis that man has no rights except those given him by government. Despite this growing tendency to look to political power as the source of material betterment and as the guide to our personal destinies, we still talk of limited government, states rights, checks and balances, and of the personal virtues of thrift, industry, and initiative. Thanks to our literature, the tradition hangs on even though it has lost force. But there are many Americans to whom the new trend is distasteful, partly because they are traditionalists, partly because they find it personally unpleasant, partly because reason tells that it must lead to the complete subjugation of the individual, as in Nazi Germany or Communist Russia, and they don't like the prospect. It is for these Americans that this book was written. For their opposition to the trend takes the shape of reform, while nothing will turn it but revolution. And by "revolution" I mean the return to the people of that sovereignty which our tradition assumes them to have. I mean the return to them of the power which government confiscated by way of the Sixteenth Amendment. When you examine any species of government intervention you find that it is made possible by revenues. A government is as strong as its income. Contrariwise, the independence of the people is in direct proportion to the amount of their wealth they can enjoy. We cannot restore traditional American freedom unless we limit the government's power to tax. No tinkering with this, that, or the other law will stop the trend toward socialism. We must repeal the Sixteenth Amendment. Washington, February 1954 October 2002, The Ludwig von Mises Institute, by Frank Chodorov, The Income Tax: Root of all Evil (Copyright 1954 by Frank Chodorov and the Devin-Adair Company)
12) Walter Williams: Economic Asininities Whenever there's a World Trade Organization, Monetary Fund or World Bank meeting, crowds of idealistic, useful idiots show up to riot and protest against what they call globalization and capitalistic exploitation of Third World poor people. They charge Western multinational corporations with exploiting the poor through "slave" wages and child labor. Let's examine this nonsense. According to the Economist magazine, multinational corporations typically pay wages that are double the local wages in Third World countries but far below those paid in richer countries. That, to protesters, is evidence of exploitation of the poor, but is it? [Link to full article below:] November 2, 2002, The Washington Times, by Walter Williams, Economic asininities
13) Richard Rahn: Growth and Envy The empirical evidence from around the world during the last half-century clearly shows that, in general, high-growth and prosperous economies on average have less income disparity than low-growth and low-income societies. [Link to full article below:] November 5, 2002, The Washington Times, by Richard W. Rahn, Growth and envy
14) Harvard Business School: Are We Racing to the Bottom? Evidence on the Dynamics of International Tax Competition This paper examines the pervasive claim that mobile corporations increasingly bear no burden of taxation in globalized capital markets shifting the burden to immobile factors. This popular claim is contrasted with the alternative theoretical prediction that capital taxation can persist in global markets through the device of foreign tax credits and the presence of large capital exporters. Evidence is provided in support of the alternative claim whereby race to the bottom incentives are attenuated and capital exporters, not capital importer, dictate the dynamics of international tax competition. By exploiting data on U.S. multinational activities and the composition of tax revenue around the world, this paper demonstrates that race to the bottom incentives appear to be attenuated relative to the popular claim. [Link to full study below:] Harvard Business School, By Mihir A. Desai, Are We Racing to the Bottom? Evidence on the Dynamics of International Tax Competition, Published after 1996(?)
November 8, 2002, Tax-News.com, by Jason Gorringe,Gibraltarians Almost Unanimous Against Joint Sovereignty November 6, 2002, Free market Net, by J.D. Tuccille, Americans again question government power November 5, 2002, BBC News, Jersey signs tax agreement with US November 5, 2002, BBC News, Jersey signs tax agreement with US November 5, 2002, The New York Times, By David Cay Johnston, Departing Chief Says I.R.S. Is Losing War on Tax Cheats November 4, 2002, BBC News, by Julian Knight, Britons burdened by red tape November 4, 2002, Tax-News.com, Panama's Foreign Minister Attacks The OECD November 3, 2002, The Washington Times, by Hugo Gurdon, The Nice treaty not so nice for the U.S. November 1, 2002, The Washington Times, by Ernest S. Christian & Gary A. Robbins, Stealth approach to tax reform October 31, 2002, Telegraph (London), By Toby Harnden, US may set up MI5-style spy agency in security shake-up October 28, 2002, The Washington Times, by John Linder, Make the code less taxing
Best regards,
Andrew Quinlan __________________________ Did you like what you just read? If so, consider contributing to the Center for Freedom and Prosperity at:
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