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US Institutes Attack OECD Over Melbourne Comments

by Mike Godfrey,, Washington

09 December 2005

US free market institutions and pro-business lobbies have reacted strongly to the OECD's attack on market-friendly incorporation laws in some states of the union at its Global Tax Forum in Melbourne, Australia, last month.

The Paris-based bureaucracy reiterated its opposition to market-friendly incorporation laws and – in a swipe at America – urged nations with federal systems to pressure "political subdivisions" into changing their policies in order to assist in slowing the flight of capital from high-tax nations to lower tax regions.

The Center for Freedom and Prosperity Foundation and several members of the Coalition for Tax Competition this week condemned the OECD for attacking America's federal system, and also expressed their concern that the Treasury Department delegation at the Melbourne conference acquiesced to the attack.

Andrew Quinlan, President of the Center for Freedom and Prosperity Foundation, stated: "Since the United States is the only nation with a decentralized system for incorporating companies, it does not take a Sherlock Holmes to figure out that the OECD is targeting Delaware, Nevada, and other states. It is very disappointing that the Treasury bureaucrats at the meeting allowed this attack on America's Constitutional system."

Daniel Mitchell, Senior Fellow at the Heritage Foundation, added: "The OECD's report is an unambiguous attack on Delaware, Nevada, Florida, Wyoming, Montana, and other states that are internationally competitive in the market for corporate services. If these states are attracting business from Europe's high-tax welfare states, then nations such as France and Germany should lower the burden of government rather than using the OECD as a vehicle to attack more successful jurisdictions."

Veronique de Rugy of the American Enterprise Institute commented: "America's decentralized federal system should be celebrated rather than persecuted since it encourages states to adopt market-friendly policies. Ironically, the OECD is attacking US policies, yet these are the same policies that led the World Bank to give America a very high grade in its widely acclaimed publication, Doing Business in 2006."

Grover Norquist, President of Americans for Tax Reform, noted: "It is quite disappointing that the Treasury Department bureaucrats at the Melbourne meeting did not defend US interests. Fortunately, America's federal system is not dependent on the approval of a Paris-based international bureaucracy. I fully expect states like Delaware to appropriately ignore the sour grape comments of Europe's welfare states."

Dave Keene, President of the American Conservative Union, concurred: "The competitive vibrancy of US politics and economics is in large measure traceable to the federal system established by the founders that European centralizers find so repugnant. Their opposition to anything that stimulates competitiveness among jurisdictions strikes me as unremarkable, but the failure of US officialdom to recognize and respond to an attack on the genius of the system established by our Constitution is both remarkable and unforgivable."

John Berthoud, President of the National Taxpayers Union, said: "Federalism is the backbone of America, and America's state-based system for company chartering is successful precisely because of jurisdictional competition. Neither bureaucrats at the OECD nor bureaucrats at the Treasury Department have the right to impose regulatory burdens on states like Delaware and Nevada."

Matt Kibbe, President of FreedomWorks, commented: "Our Founding Fathers wanted limited government, which is one reason they set up a federal system in the Constitution. That system has worked well for America, in part because states must compete with each other. Bureaucrats should not be allowed to undermine that system, whether they reside in Paris or the Treasury Department."

Pat Toomey of the Club for Growth also expressed opposition: "The President's appointees at the Treasury Department should override the misguided actions of the bureaucrats who let us down at the OECD's anti-tax competition meeting in Melbourne."

Karen Kerrigan, President of the Small Business & Entrepreneurship Council, noted: "Competitive markets for company services and goods are particularly important for the small business community. The OECD's campaign to prop up Europe's welfare states is a threat to good tax policy – and also poses grave risks for America's vibrant small business sector."

Tom Giovanetti, President of the Institute for Policy Innovation, added, "The OECD has become infamous for supporting anti-tax competition policies that lead to bigger and more inefficient government. Now, with the acquiescence of Treasury bureaucrats, the Paris-based bureaucracy wants to undermine America's federal system. Congress should quickly act to eliminate US subsidies for the OECD."

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