O'Neill Limits Information Exchange In OECD Letter

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

18 June 2001

We have obtained a copy of a letter written by US Treasury Secretary Paul O'Neill to a group of his OECD Finance Minister colleagues following his public renunciation of some aspects of the OECD's 'harmful tax competition' initiative. The letter, to Gordon Brown of the UK, Hans Eichel of Germany, and Laurent Fabius of France, among others, makes it clearer that O'Neill is both against any attempt to rein back tax competition, but also against the OECD's attack on 'discriminatory' tax regimes. The letter also would seem to say that information exchange between countries is only justified when information exists to inculpate a specific individual. This clarification is important in view of the OECD's attempt to portray recent meetings in Paris as heralding the US's recommittment to extensive information exchange.

Paul O'Neill's original statement in May ended with these words:

'The work of this particular OECD initiative, however, must be refocused on the core element that is our common goal: the need for countries to be able to obtain specific information from other countries upon request in order to prevent the illegal evasion of their tax laws by the dishonest few. In its current form, the project is too broad and it is not in line with this administration´s tax and economic priorities.'

These words would have permitted quite extensive information exchange, and an OECD meeting of high-level tax officials in Paris to re-shape the 'harmful tax competition' initiative ended on 13th June with the OECD duly trying to spin the meeting as a reaffirmation of generalised information exchange.

'Tax officials from the United States and other countries ended a meeting here today and returned home to seek political agreement for proposals under which the United States and the Organization for Economic Cooperation and Development would cooperate on reducing tax revenue lost to offshore havens,' said a communique. "Many of the countries wish to go back to their governments to seek political backing for the proposals under discussion," said Nick Bray, a spokesman for the OECD. 'New agreements for the plan are likely to concentrate on greater transparency and exchange of information, which the United States supports.'

But O'Neill's letter, dated June 7th, allows only a much more tightly defined interpretation of what the US will sign up to. He accepts 'the need for countries to be able to obtain specific information from other countries upon request in order to enforce their respective tax laws', and agrees to 'effective information exchange when necessary in specific cases'.

Asked to comment, Andrew Quinlan, President of the Washington-based Centre for Freedom and Propserity, which has been very active in opposing the OECD's initiative, said:

"While O'Neill's statement is not 100 percent what we want, it is closer to our position than the OECD's position. Most importantly it rejects indiscriminate information exchange."

See a full copy of Secretary O'Neill's letter in Tax-News.com Resources.

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