Editor?s note: This is the second in a two-part series. (Part one can be read here.)
BERLIN ? In two days of closed-door meetings recently, an international bureaucracy of industrialized nations?whose membership is dominated by ?old Europe??was attempting to ?persuade? low-tax nations to raise taxes and eviscerate financial privacy.
The Paris-based Organization for Economic Cooperation and Development (OECD), which receives some $50 million annually from U.S. taxpayers, has for six years pushed for eliminating what it calls ?harmful tax competition??which can be best described as any policy that undermines the ability of welfare states like France, Belgium, and Germany to maintain extraordinarily high tax rates.
The stated goal of this project is to stamp out so-called ?tax havens??jurisdictions that have appealing tax and privacy laws, and thus attract investment capital and business from high-tax regions, primarily European welfare states. The OECD even has a blacklist, and has threatened these jurisdictions with financial protectionism.
The problem, at least from the OECD perspective, is that the jurisdictions they are targeting insist that they shouldn?t be forced to surrender their fiscal sovereignty until all nations and territories agree to the same policy.
This ?level playing field? requirement puts the Paris-based bureaucracy in a quandary since member countries such as Switzerland, Luxembourg, and even the United States, are tax havens under the OECD?s standards. Each has little to no taxes on non-resident investors, and those foreign investors generally can structure their affairs to avoid the reporting of their financial information to home country tax authorities.
Yet the OECD has been unsuccessful to date in ?persuading? its own tax haven members to adopt bad tax policy, in part because it is much more polite when dealing with its own member nations. There are no threats of protectionism and no blacklist. The bureaucrats apparently realize the futility in fighting nations that can fight back.
So it is little wonder that smaller nations like Panama and the Bahamas felt unduly picked upon when their supposed sin is adopting rules for foreign investment modeled on those of several OECD members.
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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