US Reconsidering OECD Proposals On Tax Havens

by Justin Gorringe, Tax-News.com, London

25 September 2001

According to recent reports, the United States is set to reconsider the question of punitive sanctions on offshore financial centres proposed by the Organisation for Economic Cooperation and Development (OECD) in light of the response received from tax havens during the American hunt for the assets of Osama Bin Laden.

This announcement follows complaints from investigators working in the Treasury Department's new asset tracking center that investigative progress is being slowed whenever the money trail leads offshore. 'If necessary, we will use the considerable persuasive powers of the US to close certain [offshore] centres down,' a senior US official was recently quoted as saying in the UK press.

Any renewed ferocity on the part of the US Treasury towards tax havens would be in direct opposition to the country's position earlier this year; it was in fact the US Treasury Secretary, Paul O'Neill, who slowed the progress of the OECD initiative by expressing his doubts over the necessity for extensive punitive action. The recent terrorist attacks have changed all that in the eyes of America, however, as confirmed recently by a US Treasury spokesman: 'In the context of these extraordinary new circumstances, we will certainly reassess the OECD issue,' he said.

Fears that recent events could seriously impact on banking secrecy in offshore financial sectors were voiced earlier this month by e-commerce tax expert David Hardesty, who admitted that 'there is little doubt terrorists and others use secret accounts to finance their operations.' The US Treasury has declined to comment on the tax havens which it has found to be uncooperative in assisting with its investigations, but this change of tack on the part of the United States will doubtless have repercussions throughout the offshore world.

UK dependent offshore territories are also fearful following this weekend's ECOFIN meeting of European finance ministers, as it now seems almost certain that Chancellor Gordon Brown will back any newly-aggressive moves made by the US.

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