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US Treasury's Eizenstat Says Globalisation Demands Global Tax Standards

Jeremy Hetherington-Gore, Tax-news.com, London

27 July 2000

In a speech to the Coalition of Service Industries and Tax Council in Washington July 26, US Deputy Treasury Secretary Stuart Eizenstat said the value added tax (VAT) proposed by the European Union (EU) on products delivered over the Internet poses numerous threats to trade, and that global taxation standards are needed to keep pace with the increased flow of international trade.

The EU's VAT would discriminate against electronic commerce, would have harmful consequences with regard to trade, jurisdiction and privacy, would impose onerous burdens on industry and would be difficult to enforce, Eizenstat said.

He criticised the EU for formulating the tax on its own, and said that the OECD was the right forum in which to take forward the process of defining or discussing taxes with global reach, and particularly those affecting e-commerce.

Secretary Eizenstat also said that the OECD would be the right place for the Foreign Sales Corporation impasse to be discussed. This amounts to a slap in the face for the WTO, and an acknowledgement that the WTO is unable to deal with such major issues due to lack of resources.

Naturally, Eizenstat threw another punch at offshore: tax havens, he said, cause harmful tax competition, and need to be eliminated in order to create a healthy global tax system. Cross-border tax arbitrage, which exploits the differences in the tax laws of two or more jurisdictions, needs to be
eliminated.

There was little new in the Treasury Secretary's speech, but it amounted to a summary of the Treasury Department's international tax policies, which have gathered form over the last few years until they now represent a coherent attempt to impose a harmonised global taxation system, with levelling-up of taxation rates to US standards.

The Department's chosen instrument is the OECD, in preference to the WTO. This reflects the fact that the OECD, which used to be a bastion of free trade, has succumbed to the 'third way' heresies of the centre-left administrations which have been dominant among its member governments in recent years, while the WTO remains staunchly pro-trade under right-wing New Zealander Mike Moore.

This is a lame duck administration, remember, and we may be witnessing its last, futile mouthings before the commencement of a period of Republican hegemony in the White House and the Congress.

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