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(English) Another Ominous Development: OECD Targets. Tax Avoidance at Global Tax Forum

(Washington, D.C., Thursday, June 2, 2010) In a remarkable development, the Organization for Economic Cooperation and Development asserted at the Global Tax Forum that it has the power to regulate and restrain tax avoidance and other forms of legal tax planning. The Multilateral Convention on Mutual Administrative Assistance in Tax Matters, which is now the OECD’s preferred vehicle for thwarting tax competition, openly references “combat tax avoidance” as a reason for the new pact.

While the assertion that it has the power to target tax avoidance is startling, this step is consistent with the OECD’s underlying philosophy on tax matters. The Paris-based bureaucracy’s tax work is guided by an ideology known as Capital Export Neutrality (CEN), which is premised on the notion that taxpayers should never have the ability to lower their tax burdens. The CEN ideology makes no distinction between tax avoidance and tax evasion.

For taxpayers, this new step by the OECD does not bode well. The business community almost certainly will be targeted, as will other taxpayers with cross-border economic activity.

Brian Garst of the Center for Freedom and Prosperity Foundation, who went to Bermuda for the Global Tax Forum, observed, “The OECD has continued to move the goal posts, and the addition of ‘tax avoidance’ is another example of this bad-faith behavior.” Andrew Quinlan, President of the Center for Freedom and Prosperity Foundation, added that, “The OECD tried a similar stunt during the 2009 Global Tax Forum, but that ‘Mexico City Surprise’ was fortunately not successful.”

Dan Mitchell, a Senior Fellow at the Cato Institute and part of the CF&P delegation in Bermuda, observed, “The OECD represents the interests of Europe’s high-tax welfare states and the Global Forum is nothing but a mechanism to seek ways of propping up those uncompetitive nations with more tax revenue. This assault on legal tax planning is reprehensible, but predictable.”

This development in the OECD’s anti-tax competition campaign, including the language and commentary from the Multilateral Convention, is contrary to American jurisprudence. As former Court of Appeals Judge Learned Hand succinctly observed, “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. …[N]obody owes any public duty to pay more than the law demands.”

CF&P has fought for over a decade against attacks by international bureaucracies – and in particular the OECD – on tax competition, which should be celebrated as a beneficial force in both politics and economics. CF&P remains committed to its mission of defending tax competition, fiscal sovereignty, and financial privacy.

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