Senators Oppose Move To Cut Off US Funding To OECD Tax Initiatives

by Mike Godfrey, Tax-News.com, Washington

19 November 2004

Two senior US senators are urging lawmakers to drop a provision that could prevent the United States from funding OECD initiatives on cross border sharing of tax information.

The provision in question would cut funding to the Organization for Economic Cooperation and Development (OECD) if it “engages in efforts to encourage information exchange between national tax authorities about the investment activities of foreigners in their country”.

However, in a letter sent to lawmakers overseeing the pending Senate Commerce-Justice-State appropriations bill, Chairman of the Senate Finance Committee Charles Grassley and ranking Democrat Max Baucus argue that such a move would erode progress made to combat abusive tax shelters, international money laundering and terrorist financing.

“An attempt to suppress progress in tax information exchange would foster an environment of disrespect for the law and would sanction safe harbors for financial abuses and terrorist financing activities,” Grassley and Baucus wrote.

The Senators added:

“Unfortunately, the provision to bar the funding of the OECD if it encourages information sharing runs counter to, and would have a chilling effect on, congressional and Executive Branch efforts to crack down on tax evasion.”

“We strongly oppose this measure or any measure that would make OECD funding contingent on suspending further discussions regarding information exchange agreements.”

However, the proposed measure has the support of many within the US business community, who argue that the OECD’s tax initiatives run counter to free market principles and damage American economic interests.

In a letter to Commerce, State and Justice Appropriations Subcommittee chairmen, Senator Judd Gregg (R-New Hampshire) and Congressman Frank Wolf (R-Virginia) the Center for Freedom and Prosperity, joined by more than 30 of the country's largest free market groups put the case for ending US funding of the OECD.

“We are particularly disturbed that the OECD has a 'harmful tax competition' project that seeks to hinder the flow of jobs and capital to low-tax nations,” announced the CFP.

It went on to add: “And since the United States is the world's biggest beneficiary of international capital flows and tax competition, it certainly seems ill advised for the American taxpayer to finance this effort."

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