The Center for Freedom and Prosperity says that low-tax jurisdictions have no obligation to acquiesce to OECD demands because the *”level playing field”* condition has not been satisfied.
Daniel Mitchell of the Washington, D.C.-based Heritage Foundation will be one of the speakers at a CF&P hosted Tax Competition Roundtable in Ottawa next week. According to a release from President Andrew Quinlan, Mr. Mitchell will present a Strategic Memo developed for CF&P, proving that the level playing field does not exist.
The CF&P’s October 13 event – designed to educate policy makers – brings together leading international tax experts to discuss how best to preserve tax competition, financial privacy, and fiscal sovereignty. The OECD has been invited to participate in the Roundtable, scheduled to coincide with its Global Forum on International Tax Policy, taking place October 14-15.
Reproduced below is a summary of Mr. Mitchell’s Strategic Memorandum.
The Organization for Economic Cooperation and Development’s attempt to undermine tax competition has not had much success, even though so-called tax havens have been threatened with financial protectionism if they do not join the OECD’s tax cartel. Many low-tax jurisdictions did make “commitments” to weaken their attractive tax and privacy laws – but explicitly stated that those commitments were binding only if all OECD nations agreed to the same flawed rules (the famous “level playing field” requirement). This has created immense problems for the Paris-based bureaucracy since many OECD nations – including the United States, the United Kingdom, Switzerland, and Luxembourg – are tax havens.
This paper demonstrates that the level playing field does not exist – especially since the European Union was forced to abandon its original Savings Tax Directive when most OECD tax havens refused to agree to share confidential information about non-resident investors with foreign tax authorities. So-called tax havens now have to make a choice:
· They can acquiesce to the OECD, which means surrendering their fiscal sovereignty and condemning their own people to lower living standards and less opportunity. Or,
· They can take this opportunity to withdraw – or at least suspend – their commitment letters. This course of action is not only legally correct (the OECD, after all, failed to fulfill its obligations), but also morally sound.
Tax competition is a liberalizing force in the world economy. Fiscal rivalry helps lower tax rates and helps reduce discriminatory taxes on income that is saved and invested. And since even OECD economists have widely written that lower tax rates and neutral treatment of capital are important contributors to economic growth, the time has come to seize the high ground.