Washington-based lobby group The Centre for Freedom and Prosperity, which has played such a prominent role in the fight against the OECD's 'Unfair tax competition' initiative, has issued a memorandum to offshore jurisdictions and other key participants in the battle, encouraging its allies not to give up the struggle just because one battle has been won:
' Treasury Secretary Paul O’Neill’s announcement that the Bush
Administration
would not support the OECD’s “harmful tax competition”
initiative was a
dramatic victory, and a tribute to the effective work of the Center for
Freedom and Prosperity.
'From the beginning, supporters of tax competition, financial privacy,
and
fiscal sovereignty worked to achieve this goal because it was our belief
that the OECD’s proposed tax cartel could not succeed if the world’s
largest
economy refused to participate. More specifically, the threat of financial
protectionism is relatively hollow so long as persecuted jurisdictions
realize that they have continued access to the US market – and, through
the
US, access to the world.
'Yet the battle is not over. Almost surely, the OECD will desperately
try to
regain the offensive by pressuring jurisdictions to capitulate. Our message
is simple: If you had the courage to resist six months ago, when it appeared
that the OECD had a near-100 percent chance of winning, then it makes
absolutely no sense to surrender now. In addition, we suggest:
'· Coordinate with other jurisdictions. In the beginning, the
OECD had some
success by isolating regimes and browbeating them (often with help of
the
closet tax harmonizers in Tony Blair's UK government) into submission.
A
much better approach, as demonstrated by Barbados Prime Minister Owen
Arthur, is to band together. Indeed, it could be that the turning point
in
this battle occurred at the OECD regional meeting in Barbados. Remember:
United we stand, divided we fall.
'· Seize the moral high ground. The OECD enjoyed some early success
by
characterizing low-tax nations and territories as some sort of fiscal
parasites that created special laws to 'poach' the tax bases of other
nations. Lawmakers and private sector leaders should not accept this
ridiculous characterization. Point out that OECD nations are bullies who
are
threatening smaller jurisdictions in the hopes of imposing their oppressive
tax laws (usually for the purpose of double-taxing income that is saved
and
invested) on income earned outside their borders. Point out that they
are
threatening to violate international trade accords and that they want
to
suspend common-law legal protections such as the presumption of innocence
and the right to privacy.
'· Cooperate in the fight against real crime. The OECD almost
surely will try
to smear the reputation of low-tax jurisdictions by increasing the level
of
money-laundering demagoguery. On the theoretical level, persecuted regimes
should fight back. Point out that the vast majority of criminal funds
are
obtained and laundered in OECD nations. On a practical level, it would
be a
tragic mistake for a jurisdiction to drag its feet in the battle against
genuine criminal behavior. This does not mean, of course, that civil
liberties should be trampled or that constitutional freedoms should be
ignored. But it does mean that jurisdictions should take special pains
to
assist in the prosecution of drug dealers, terrorists, and other
international crooks.
'· Those that surrender will lose business. If defending core
principles is
not a sufficient reason to resist the OECD, remember that jurisdictions
that
agree to become vassal tax collectors almost certainly will lose business
to
jurisdictions that defend the principles of tax competition, financial
privacy, and fiscal sovereignty.
'· The OECD facade is crumbling. The US announcement is huge news,
but do not
overlook the dramatic impact of the change of government in Italy. The
new
Prime Minister already has stated that he supports tax competition, which
means that there now are two G7 nations that have broken ranks with the
bureaucrats in Paris. And if our continued conversations with other nations
are any indication, there are many other nations that are looking for
a
graceful way of distancing themselves from the OECD mess.
'· There will be no let-up in the pressure on US policy makers.
The Center
for Freedom and Prosperity will continue to lead the battle inside the
United States. This relentless determination will ensure that career
bureaucrats at the IRS and elsewhere are not able to help the OECD behind
closed doors. Indeed, the Center already is working hard to educate
lawmakers on the benefits of shifting to a territorial system. And once
that
battle is won, it is highly unlikely that a US government would ever again
support an effort to destroy tax competition, financial privacy, and fiscal
sovereignty.'
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