(English) U.S. Senate’s Passage of Anti-Tax-Haven Provisions Would Be Counterproductive

Reprinted from Tax Notes Int´l, April 9, 2012, p. 139    

By Bruce Zagaris    

Bruce Zagaris is a partner of Berliner, Corcoran & Rowe, LLP, Washington, D.C. and a writter-editor for The International Enforcement Law Reporter (www.ielr.com). Mr. Zagari´s practice includes structuring international business transactions and specially international tax aspects. He has served as a consultant, counsel and lobbyist for fourteen governments on various subjects. He is a frequent speaker at programs of the Practicing Law Institute, American Law Institute-American Bar Association, World Trade Center, and showcase programs at the American Bar Association’s Annual Conventions on international taxation.   

The Levin/Conrad anti-tax-haven provisions, if enacted, have the potential to add more egulatory diversity and impede globalization of international financial services. They will impose new burdens on Treasury at a time when it can better allocate its limited resources to more important matters.  

The U.S. should abandon the concept of an offshore secrecy and tax haven jurisdiction on which the Levin/Conrad anti-tax-haven provisions are based. Instead, the U.S. should champion multilateral and bilateral solutions.    

for corporate transparency, it should resist these aggressive unilateral and punitive enforcement initiatives, since the contrast between lack of U.S. compliance with international standards and the U.S. government’s own unilateral extraterritorial enforcement undermines the requirement of a level playing field, on which the legitimacy of the international standards is based.    

The supposed revenue gains from the anti-tax-haven provisions seem not to have taken into account the likely disinvestment by foreign investors in both U.S. portfolio investment and FDI or the continued trend of accelerated expatriation. The potential for disputes brought by financial institutions and governments, which are already exasperated over the burdens and costs of complying with FATCA, is significant.    

Until the U.S. meets the international standards for corporate transparency, it should resist these aggressive unilateral and punitive enforcement initiatives, since the contrast between lack of U.S. compliance with international standards and the U.S. government’s own unilateral extraterritorial enforcement undermines the requirement of a level playing field, on which the legitimacy of the international standards is based.    

The supposed revenue gains from the anti-tax-haven provisions seem not to have taken into account the likely disinvestment by foreign investors in both U.S. portfolio investment and FDI or the continued trend of accelerated expatriation. The potential for disputes brought by financial institutions and governments, which are already exasperated over the burdens and costs of complying with FATCA, is significant.