OECD: a Pro-Market Organization Which Lost Its Way

by  Anton Keller, Secretary,
Swiss Investors Protection Association
t+f:  004122-7400362    m: 004179-6047707   e: swissbit@solami.com

Geneva, 14 May 2001  -  Until very recently, it was as if the Berlin Wall had fallen the other way.  Particularly in the field of tax reform, the imminent legislative successes at home turned out to be seriously jeopardized from abroad - by way of the OECD of all places where the United States is a founding member.  Prodded by alarmed U.S. lawmakers, the new tenant in the White House quickly recognized the need to rain in - if need be with the power of the purse - a formally pro-market organization which seems to have been hijacked by single-minded bureaucrats pursuing discredited and indeed harmful policies reminiscent of the Soviet Era.

The U.S. Treasury thus begun to take its distance, officially questioning "the United States´ participation in the Organization for Economic Cooperation and Development working group that targets 'harmful tax practices'".  And its Secretary Paul O'Neill left no doubt that U.S. leadership in international bureaucratic lawmaking is not on his agenda, when he wrote: "The United States does not support efforts to dictate to any country what its own tax rates or tax system should be, and will not participate in any initiative to harmonize world tax systems. The United States simply has no interest in stifling the competition that forces governments like businesses to create efficiencies." (Washington Times, May 10).

Though far from a reliable turn-around, that has been good news for the forces which are re-awakening to the benefits of tax reform, tax competition and financial privacy and which, visibly, are gaining the upper hand, not least in the U.S. Congress.  Indeed, as indicated by developments in the United States, Italy, Britain, France and Germany, citizens everywhere increasingly take a stand against Big Brother interference in their affairs.  Members of the OECD may thus finally reverse the tendency of this former bullwark of pro-market forces to be used as an anti-competition, anti-sovereignty and anti-privacy instrument in the hands of unelected bureaucrats.  For now, O'Neill has shut one door, but left others open and even widened some.

Self-servingly, many OECD and EU models, guidelines and recommendations were designed to enhance the clout of effectively out-of-control bureaucrats with transnational snooping powers. With its entrenched tentacles and allies the world over - including in today's U.S. Treasury -, a little-known OECD working group has already succeeded to bring into force the INTERFIPOL (OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters) and to equip itself with an enforcement arm, the Financial Action Task Force (FATF).

Indeed, the secretive OECD Fiscal Committee and its Working Party #8 on Tax Avoidance and Evasion (WP8) are the hidden forces behind the long-standing efforts at OECD and the EU in Brussels to "harmonize" - i.e. plain-levelling at the highest imposable rate - the tax regimes in the industrialized world.  This is being done by fighting such cleverly made-believe dangers as "harmful tax competition", by promoting anti-money laundering standards, and by deliberately confusing illicit activities with the very linchpin of entrepreneurial activities, i.e. tax avoidance. This is a far cry from protecting and helping to beneficially exercise the fiscal sovereignty as an integral, even key part of each nationís sovereignty.  Tax reform, fiscal revenues and economic growth thus suffer.

With a view to tax e-commerce, similar bureaucratic lawmaking mechanisms have already been brought into place, with similar methods expected to lead to further innocent-sounding, yet liberty-eroding, enterprise-stifling and commerce-undercutting "recommendations", "guidelines" and "OECD standards".  This is routinely intended to have less-informed incoming political leaders sign up on the dotted lines of past - even if discredited - policies, to take notably constitutional lawmakers by surprise and to steamroll the less vigilant into compliance with the latest fashionable designs of international bureaucratic lawmaking, purported globalization blessings and tutelage structures.

Thus have come about such Orwellian schemes as the G-7/OECD'sFATF and the related "Reports on the Observance of Standards and Codes" (ROSCs).  These are yet to be recognized for what they really are by many who are concerned with tax reform, fiscal sovereignty and wealth privacy.  For the interested bureaucrats are still used to getting what they want by skillfully adopting their tactics to changed political winds.  Take the case of the afore-mentioned G-7 Statement: they successfully proposed language essentially replacing the no-no word OECD with FATF which is not yet on the radar of many concerned pro-market politicians and libertarians.  Indeed, under the sub-heading of "Action Against the Abuses of the Global Financial System" the G-7 Finance Ministers and Central Bank Governors were lead to approve a G-7 Statement of unreserved support for the FATF.  It is less than certain that all of the signatories are aware of how this came about.  What the FATF stands for and implies.  And that they thus also subscribed to the generally discredited INTERFIPOL objectives which include notably a global tax data exchange.  The G-7 Statement of April 28, 2001 concludes in fact:

"19.  We reaffirm our support for all the objectives of the multilateral effort to fight against abuse of the global financial system.  We express our support for the ongoing work of FATF, and we welcome the significant progress made by most of the 15 jurisdictions listed by FATF as non-cooperative countries and territories (NCCTs) in June 2000 towards addressing the deficiencies in their anti-money laundering systems.  We encourage those jurisdictions to implement needed reforms.  We note our continued commitment to maintain a dialogue with these countries, to provide training and technical assistance, to delist those making adequate progress, and to implement coordinated measures as may be recommended by FATF against those NCCTs where dialogue has failed to generate sufficient progress.  In addition, we welcome the FATF decision to undertake a review of its 40 recommendations to strengthen the international money laundering standard.  We also welcome the IMF and World Bank Boards' recent decisions to recognize the FATF 40 Recommendations as the appropriate international standard for combating money laundering and encourage the Fund and the Bank, working in collaboration with FATF, to incorporate the relevant FATF 40 Recommendations into a ROSC module as soon as possible."
Beholden to the surveillance of no constitutional lawmaker anywhere, the OECD-headquartered FATF is the ultimate example of international bureaucratic lawmaking.  On its homepage http://www.oecd.org/fatf/ it advertises itself as a "policy making body".  Since its creation in 1989 by the G-7, it has sought to develop - and globally impose - standards for fighting crimes and offenses by concentrating on the related money trails.  Having encountered no real opposition, by 1995 it had shed all pretense of being limited to drug-related crimes, seeking instead to globally impose market-inhibiting surveillance standards "on all serious offences and/or on all offences that generate a significant amount of proceeds" (Interpretative Note on FATF Recommendation 4).  Unless checked in time, the FATF is likely to unfold awesome transnational police powers.  This will be both on its own and through local laws, apologetes and handymen.

World wide, tax avoidance is understood to involve probably more funds than all drug-related and other real crimes combined.  Even though its market relevance and legality cannot seriously be questioned, tax avoidance is undoubtedly an offense against any high-tax regime and as such can thus easily be construed to fall into the surveillance grid promoted by the FATF.  Which should surprise nobody, considering the FATF's origin as an outgrowth of the OECD's initially failed INTERFIPOL convention.

Every trick in the book, including use of patently false translations, is being used to promote the OECD's objectionable policies.  The official French name of WP8, the OECD Working Party on Tax Avoidance and Evasion is: "Group de travail sur líévasion et la fraude fiscale".   Indeed, in its publications the OECD systematically mistranslates "tax avoidance" - which is legal everywhere - with "évasion fiscale" - which is a criminal offense in many countries The OECD thus not only persistently misrepresents and undermines a key pillar of the free market, but it also has created a confusion which, over the years, has helped those in favor of global tax harmonization and other fiscal aberrations.

In order to effectively take both the power and the sting out of this OECD working group - and indeed to re-orient all OECD activities in favor of tax competition, fiscal sovereignty and wealth privacy - the U.S. influence at the OECD should be brought to bear accordingly: to the acclaim of concerned citizens and leaders the world over.  This could be done by way of a U.S. withdrawal from the OECD's discredited INTERFIPOL convention.  And by way of a credible threat to cut off U.S. funding of OECD. Until such time when the OECD Fiscal Committee will no longer be mandated but prohibited from "combating tax avoidance".  And the terms of reference of its working groups and affiliated task forces will have been brought in line with the OECDís statute (which, nota bene, specifies the promotion of entrepreneurial liberties and activities, naturally including tax avoidance).

With a U.S. President, Treasury Secretary and congressional leaders who understand the importance of tax competition, fiscal sovereignty and financial privacy, the threat to cut off funds becomes an effective instrument.  A political critical mass is being formed in the U.S. Congress and abroad over the OECD's cancerous bureaucratic lawmaking.  Concerned taxpayers everywhere are finally finding an open ear and an effective representation for their legitimate fiscal concerns.  They can be expected to return the favor to those who give them their money's worth' protection against foreign tax snoops which, with OECD's help, almost succeeded to deprive not least the U.S. economy of the benefits of investor-friendly tax and other conditions.

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