Think Tank Denounces Senate's 'Kangaroo Court' Tax Haven Hearing

by Mike Godfrey, Tax-News.com, Washington

05 March 2009

According to the Center for Freedom and Prosperity, the latest tax haven hearing put together by the Senate Permanent Subcommittee on Investigations serves only to demonize low tax jurisdictions while overlooking pro-growth changes that would protect human rights and reduce tax evasion.

The hearing, scheduled for March 4 and entitled 'Tax Haven Banks and US Tax Compliance - Obtaining the Names of US Clients with Swiss Accounts,' will continue the Subcommittee’s ongoing examination of offshore financial institutions and their alleged role in facilitating tax evasion by US clients. The hearing follows the introduction of the Stop Tax Haven Abuse Act by committee Chairman Sen. Carl Levin and witness panels include John DiCicco, Acting Assistant Attorney General, Tax Division, US Department of Justice, Doug Shulman, IRS Commissioner, and Mark Branson, Chief Financial Officer, UBS Global Wealth Management.

"Because of their hostility to tax competition, some politicians have always resented nations such as Switzerland," remarked Andrew Quinlan, President of the CF&P.

"Instead of persecuting a nation with a strong tradition of human rights and a better tax system, Senator Levin's Subcommittee should consider the following two questions: if Swiss banks are obliged to put American law above Swiss law, does this mean that American banks should be required to put foreign law above US law?; academic evidence strongly indicates that tax compliance is undermined by high tax rates, so why aren't Senator Levin and other politicians supporting fundamental tax reforms that would reduce tax evasion and tax avoidance?" Quinlan asked.

Concurring, Dan Mitchell of the Cato Institute, another free market think tank, notes that Switzerland's human rights policy on privacy is "something that should be emulated, not persecuted."

"Fundamental tax reform, meanwhile, is the responsible way of dealing with tax evasion," Mitchell added.

Meanwhile, Veronique de Rugy of the Mercatus Center warns that such a heavy-handed approach to the issue could be self-defeating for the United States and ultimately drive investment out of the country.

"Switzerland is a major investor in the United States, providing the capital to create jobs and strengthen our financial system. The assault against so-called tax havens not only threatens Swiss sovereignty but also risks driving away much needed capital from the American economy," she said.

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