Carta del Dr. Eduardo Morgan Jr. al Director del Centro de Políticas Fiscales y Administración de la OCDE, Jeffrey Owens

March 15, 2011

Dear Mr. Owens:

I would like to refer to your recent comments regarding “The End of Tax Havens”, published in the March issue of The International Tax Review.

It is hard to believe that you continue to talk about tax havens and yet you fail to acknowledge that the U.S., which is the principal member of the OCDE’s cartel, is the world’s biggest tax haven, according to the OECD’s own definition of the term.    How can you continue to ignore the undisputable fact that the U.S. levies no taxes on the bank deposits, capital gains or other passive investments of nonresident foreigners?     It is no secret that the U.S. does not provide information to foreign governments on bank deposits held by their nationals, with the exception of Canada.   

Have you not read the letter to President Obama, dated March 2, 2011, and signed by the 25 members of the Florida Delegation to the U.S. House of Representatives, urging withdrawal of a proposed IRS regulation (REG-146097-09) that would require reporting interest paid to foreign account holders on bank deposits, in order to be turned over to foreign governments?   Are you not aware that their main concern is that if this regulation is not withdrawn, Florida banks, as holders of substantial deposits from Latin America, would be hard hit, and this could drive job-creating capital out of America?  There is no question that such regulation would undermine U.S. financial markets, sending the message to existing and potential foreign depositors that the U.S. is no longer a secret jurisdiction.   Similar proposals have been shelved after facing strong opposition from both U.S. private industry and public policy organizations.  https://www.freedomandprosperity.org/FL-Delegation-03-02-2011.pdf.  

Should you insist in ignoring all these facts, I strongly recommend you read the study “Privately Held Non Resident Deposits in Secrecy Jurisdictions” by the Global Financial Integrity and sponsored by the Ford Foundation. This study, which has also been conveniently ignored by the OECD, clearly demonstrates that the U.S. is the biggest and most secretive tax haven in the world and of the top 10 jurisdictions reviewed, the U.S. is first on the list.  Seven of these are members of the OECD, and two (Cayman and Jersey) are dependant territories of another member.  I would also encourage you to review the numerous U.S. Senate hearings and reports from the Financial Crimes Enforcement Network, the U.S. GAO, The Financial Action Task Force (FATF), and several other reliable sources regarding U.S. transparency standards.    Where is the “transparency and effective exchange of information” which the OECD vehemently proclaims as their guiding principle and the International Accepted Standard?    

Fiscal law is an inalienable part of a country’s sovereignty, and nations worldwide rely on their economic policy and fiscal sovereignty to promote exports and attract foreign direct investment in favor of the welfare of their citizens.  Perhaps no other country in the world has these concepts more deeply ingrained in their culture than the U.S., thus becoming the international standard and benchmark for worldwide best practices.    In fact, nations throughout the world, small and large, are competing for the same financial resources and tax policy is very much a part of the competitive global business environment. To maintain balance between competitiveness and national interests, countries necessarily rely on international relations, double tax treaties and domestic laws that deal with the extraterritorial aspects of a country’s taxation. 

The U.S. is not only the most important member of the OECD, but also the indisputable leader of the G20.  By all accounts, it is the most highly developed country on the planet, precisely, due to its military and economic power, as well as its cultural dominance.  As a result, the U.S. exerts the strongest influence upon other nation’s policies, particularly, economic policy. Economic and political development relies strongly upon the fundamental pillars of competition and respect for private initiative and individual privacy.    The strength of these core principles became most evident during the downfall of those systems centered around planned economies, which ended up with the derailment of the Soviet Union and its allied nations.  

 The U.S. promotes fiscal competition and the right to privacy of individuals as a key developmental factor for protection from abusive tax regimes.  If this is the case, and if all the OECD main members share this same philosophy, the true international standard ought to be one of fiscal competition and private individual rights.  Therefore, there can be no other interpretation to the “transparency and effective exchange of information”, than being a poor excuse which seeks to eliminate the competition that small countries might pose to the OECD’s cartel members.  There is no place for double standards in a global economy.  In this context, to consider “transparency and effective exchange of information” as an “international standard” regulating fiscal matters is not only another one of the OECD’s inventions; it is also a chimera.  

I would be pleased to hear your comments and, in the meantime, I invite you to visit my Blog https://www.eduardomorgan.com . 

Regards,

Dr. Eduardo Morgan Jr.

Former Ambassador of the Republic of Panama in Washington, D.C., USA