BERLIN ? The US government wastes a lot of money, but few items in the federal budget do as much damage as the $50 million that American taxpayers send each year to the Organization for Economic Cooperation and Development (OECD). This Paris-based bureaucracy is helping pave the way for higher taxes around the world through a little-known, yet insidious project to stamp out ?harmful tax competition.?
Representing mostly high-tax European nations, the OECD thinks it is unfair when jobs and investment move from high-tax to low-tax nations. The bureaucrats are particularly upset that so-called tax havens provide a refuge for oppressed taxpayers from welfare states like France, Germany, and Sweden. As part of its anti-tax competition project, the OECD met in Berlin for a two-day conference during the first week of this month, hoping to bully tax havens into helping high-tax nations track and tax flight capital.
Using various threats, the OECD is pushing low-tax countries into providing information about nonresident investors to foreign tax authorities, meaning that any benefit of investing elsewhere disappears once European tax collectors can impose taxes on money invested outside their borders.
Acting as the Gambino family of the tax world, the OECD has pressured places like Anguilla and Panama to sign ?commitment letters? pledging to participate in something called ?information exchange? ? an odd term for a one-way flow of data from ?tax havens? to high-tax governments.
The OECD is having a problem, though, since it is throwing stones from inside a glass house. The term ?tax haven? conjures up images of small islands in the middle of a tropical paradise, but the OECD?s definition of one clearly covers many of its own member nations, including Switzerland, Luxembourg, and yes, the United States.
The United States is actually the world?s biggest ?tax haven??passive foreign investments here generally are not taxed, and investors from other nations easily can structure their portfolios so that foreign tax collectors can?t discover assets invested in the U.S.?which makes it all the more ironic that one-fourth of the OECD?s annual $200 million budget comes U.S. taxpayers.
The jurisdictions being persecuted by the OECD insist that there should be a ?level playing field,? meaning that big tax havens like the US and Switzerland agree to the same bad policies that the OECD is trying to impose on little nations and territories. As such, the ?commitment letters? they sent to the OECD are predicated on all nations agreeing to the same misguided rules.
Joel Mowbray, who got his start with Townhall.com, is an award-winning investigative journalist, nationally-syndicated columnist and author of Dangerous Diplomacy: How the State Department Threatens America's Security.
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