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CFP Warns Offshore Jurisdictions About Information Exchange

by Mike Godfrey, Tax-News.com, New York

13 June 2001

Chairman of the Washington pressure group Centre for Freedom and Prosperity, Dan Mitchell, has written a open letter to leading figures in the offshore jurisdictions warning them that, while the US's dramatic volte-face on the OECD's harmful tax competition agenda may have seen off the danger of an attack on their no- or low-tax status, the battle to maintain privacy continues, and committing the organisation to fighting on. CFP played a leading role in organising opposition to the OECD and in putting pressure on the US Treasury Department to reverse its support for the global tax initiative.

From: Dan Mitchell, Heritage Foundation

Date: June 11, 2001

Re: OECD Strategy

The “harmful tax competition” phase of the battle is over. The OECD has been routed and even the European Union is paying lip service to the notion that fiscal competition between nations serves a useful purpose (and Ireland’s vote to reject EU expansion should make the bureaucrats in Brussels even more careful in the future).

“Information exchange” is phase two of the battle, and this refers to setting the conditions under which it is legitimate for governments to suspend financial privacy and divulge confidential information to other governments. Generally speaking, proponents of tax competition, financial privacy, and fiscal sovereignty believe information exchange is acceptable when:

  • Governments are cooperating in the fight against criminal activity;
  • Governments respect due process legal protections when seeking
    information; and
  • Governments implement appropriate safeguards to protect information from
    disclosure, including appropriate penalties for those that disregard the
    safeguards.

This type of cooperation, with adequate protections of individual rights, is an agenda that presumably can attract wide support. Information exchange is not acceptable, by contrast, when:

  • Governments are trying to enforce their tax laws on an extra-territorial
    basis;
  • Governments engage in fishing expeditions that violate protections
    against unreasonable search and seizure; and
  • Governments ignore the dual-criminality principle and do not respect
    each jurisdiction's sovereign right to determine what is a crime.

This brief memo only scratches the surface of an important issue, but there will be further updates as this phase of the battle develops. Rest assured, however, that the Center for Freedom and Prosperity and the Heritage Foundation will work with other organizations and individuals to ensure that the Bush Administration understands the proper role of information exchange.

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