Geneva, 2 April 2000  - The OECD's predessessor, the Organisation for European Economic Co-operation OEEC (2)  was a key tool to implement the U.S.-sponsored "European recovery programme", i.e. the Marshall Plan.  In contrast to the socialist-block with its state-oriented COMECON organization, the West-European OEEC was not merely to restore and maintain "the prosperity of Europe" in line with "the purposes of the United Nations", but to achieve those ends with a focus on "the preservation of individual liberty".  As such it was to champion and apply free market principles in order
-    to make the most "effective use of American aid",
-    to provide for "the maximum possible interchange of goods and services",
-    to work towards "abolishing as soon as possible those restrictions which at present hamper ... trade and payments",
-    "to facilitate the movement of workers", and
-    to eliminate the "obstacles to the free movement of persons."

        Reflecting the economic recovery and progress thus achieved and the establishment of the Common Market under the Treaty of Rome in 1957 and, parallel to it, the European Free Trade Association EFTA, the OEEC, under U.S. leadership, was re-organized 1960 into the current OECD.   The organization's initial focus on "the preservation of idividual liberty" was retained in the preamble of the OECD Convention.  And its auhors' intent regarding this organization's exclusively market-economic orientation has remained unmistakable in that OECD membership has been reserved to those states subscribing to the principles of the market economy.

        According to article 1 of its Convention, the OECD shall promote corresponding policies designed "to contribute to the expansion of world trade on a multilateral, non-discriminatory basis in accordance with international obligations". Importantly, its article 2 explicitly provides for Member countries "to reduce or abolish obstacles to the exchange of goods and services and current payments and maintain and extend the liberalisation of capital movements".

        Thus, of course, neither the OEEC nor the OECD Convention contain any provision authorizing this Organization to engage in activities harmful to the maintenance and exercise of individual liberties as the key pillar of the market economy.  Also Adam Smith's First Canon on Taxation of 1776, i.e. the state's obligation to protect its taxpayers (3), still fully applies - as doesWhately's by now classical 1827 definition of taxes to be "the revenue levied from the subject in return for the protection afforded by the Sovereign." (4)  Indeed, a state's rights to tax can legimately exist only in the presence of properly heeded corresponding obligations, chief among them the obligation to protect its taxpayers' assets and fiscal privacy, particularly against foreign tentacles.

         Accordingly, state representatives and lawmakers were, are and remain here to make the best use of their national fiscal sovereignty and related traditions to attract foreign investments with competitive conditions and to effectively protect their investors and taxpayers - wherever they may come from.  And bankers worth their salt are expected to remain an investor's trustworthy confidant - not allowing themselves to be made into police auxiliaries - and to be in the vanguard to effectively oppose any infringement on their national sovereignty, including foreign snoopings, extorsions and double-taxations.

        To be sure fiscal matters were not even on the OEEC agenda until 1956, when the forerunner of the OECD's influencial Committee on Fiscal Affairs was set up.  Its initial main purpose was to seek ways and means to avoid commerce-hampering and movement-inhibiting double-taxations among Member states.   At that time avoiding double-taxation still - and exclusively - meant tax avoidance from the taxpayer's point of view which, in a genuine market economy, takes precedent over state concerns.  Of course, already then some were not overly concerned about what happens to one's taxpayers; instead, they gave preference to state-focussed socialist ideas and institutions.

        Already then - and most often behind the back of both their constitutional lawmakers and superiors at home - some innovative fiscalists found at the OECD, of all places, a fertile virgin terrain for various crusades for undermining the very foundations of Western civilization, i.e. individual liberties and privacy the U.S. Constitution and other fundamental texts unmistakably provide for.  Judging by their effects to date, they may be described as the international brotherhood of colour-blind tax professionals who always have and always will recklessly push ahead their myopic anti-market, anti-citizen and anti-privacy agendas, while instinctively opposing citizen-friendly tax proposals like President Reagan's successful supply-side tax revolution.

        Not surprisingly then, the OECD and its fiscal bodies have evolved accordingly.  And the stage has been set for an overwhelming flow of model agreements, guidelines and recommendations - nota bene: none ever examined by any constitutional lawmaker group anywhere - to lead the industrialized world into a globalized Orwellian era which will be characterized by administrative lawmakings by unelected bureaucrats increasingly taking the lead over constitutional lawmakings by elected representatives.

        To date, the perhaps most flagrant illustration of an international organization to have been hi-jacked by anti-citizen and anti-market forces can be seen in the Orwellian OECD/Council of Europe "Convention on Mutual Administrative Assistance in Tax Matters"  (http://conventions.coe.int/treaty/en/Treaties/Html/127.htm) which was allowed to come into force in 1995.  It calls a.o. for even spontaneous international fiscal data exchanges, for operating a global fiscal data bank, and for tax collection abroad.  Providing for international enforcement of national tax laws, it entails at least the embryo of an international fiscal police force and has given rise to unchecked abuses of criminal laws for what are essentially fiscal purposes.  And it not only undermines the active defense against but favors economic espionage.

        All this has been introduced in claimed-to-be harmless homeopatic doses.  It all begun with that laudable objective, namely to favor international commerce and the movement of persons by way of lifting the burden of double-taxation from the shoulders of enterprising citizens.  Yet, after years of closed-door deliberations in the world's fiscal ivory tower, the OECD has published an upside-down model double-taxation agreement.  For it blatantly suggests the pro-taxpayer exclusionary method for avoiding double-taxation to be equal to the credit method which allows the states concerned to split the higher tax take while depriving the taxpayer of the tax advantages with which he was attracted and burdening him with additional administrative obligations.

        As such, this myopic bureaucratic lawmaking trick is seen to pervert the OECD governments' initial pro-taxpayer objective into the direct opposite purportedly in favor of the treasuries of the states concerned. As if the OECD's Convention did not exist and were replaced by some remnant latter-day Kremlin regulations.  As if the Reagan tax revolution had never taken place and were not at the source of the unprecedented prosperity of the American economy.  And as if the next U.S President - whoever it may be - would not want to continue this prosperity by making the United States again the biggest tax haven on earth - with seemingly only the OECD bureaucracy blindlessly hell-bent to attack tax havens, thus foremost depriving the U.S. economy of the fruits of its re-invigorated supply-side tax policy.

        A similar - and no less objectionable, damaging and far-reaching - deviation from the OECD's fundamental objectives and norms is seen in the recommendation the OECD Council issued in 1977 to Member governments [C(77)149(Final)].  It explicitly calls for "legal, regulatory or administrative provisions" serving to enhance their powers "for the detection and prevention of tax avoidance" and to cooperate with other national tax authorities for "combating tax avoidance".

       The 1995 OXFORD DICTIONARY defines tax avoidance as "the arrangement of one's financial affairs so that one only pays the minimum amount of tax required by law." (5)  And the 1971 WEBSTER'S mentions "the use of merger agreements as a means of tax avoidance" (6).

         Moreover, the German translation of tax avoidance is given by the 1999 DUDEN OXFORD as "Steuerminderung", meaning tax reduction (7), by the 1978 CASSELL'S as "Steuerabschreibung", meaning tax deduction (8), and by the 1999 PONS COLLINS, as "Steuerumgehung", meaning tax evasion (9).  In all of the OECD's related publications, the French word for tax avoidance is always "évasion fiscale" (10).  And in the 1961 GRAND LAROUSSE, évasion fiscale is described as a "way for a taxpayer with legal means to avoid to pay what he ought to pay" (11).

        It is thus noteworthy that none of the consulted authorities consider tax avoidance as being in the least illegal - at least not those who remember the works if not of Adam Smith and Whately, so at least of Ronald Reagan.  In fact, there is - still - an impressive body of opinion sharing the time-tested view that tax avoidance is nothing more and nothing less than the individual's natural reaction when he/she doesn't get his/her taxes' worth in return.  Indeed, if the freedom to move to wherever conditions are seen to suit oneself better is to remain real, tax avoidance is and will remain the businessman's way to vote with his feet.  Just as it will remain each citizen's inherent right to freely seek greener pastures in order to escape confiscatory taxations, excessive bureaucratic burdens and/or other conditions hampering the full development of one's potentials.

        Tax avoidance is thus not only not illegal but an inherent natural right.  And it is not only a right worth fighting for but a key obligation for every homo oeconomicus.  In a free society worth its name it is thus the business of no official or institution anywhere to interfere in the free exercise of this right and obligation.  Any call for combating tax avoidance is thus ill-considered and ill-founded.  For it is a call to undermine a - if not indeed the - key function of the market economy, in as much as the market depends on entrepreneurial forces.  And these fertile forces are made sterile if legally offered conditions cannot be freely choosen from and applied without the risk of state interference and betrayal.

        In this light, the OECD's call for combating tax avoidance is seen to be fundamentally incompatible with the basic tenets of this key institution of the industrialized world.   If the OECD is to remain a useful tool for its member states, this aberrant and generally damaging call must not be allowed to stand.  Foreseeably, this and other OECD anti-taxpayer, anti-market, anti-liberty and anti-privacy recommendations and rules may be sought to be excused by the fact that they have no binding character.  Yet, seemingly reflecting the collective wisdom on the subjects concerned, and given the stamp of approval by a reputable international organization, they are seen to continuously cause damage to national economies by way of being hardly ever examined, questioned and opposed by the formal national lawmakers when invited to turn these purportedly "higher wisdoms" into national law.

        Accordingly, and, as a matter of urgency, the OECD's ill-based call for combating tax avoidance is to be corrected, reversed and brought in line with the OECD Convention and other applicable texts - as is every resolution, recommendation, guideline and rule which ever emmanated from this Holy Grail of the market economy.  This applies notably to the mandate and all products of the OECD "Working Party #8 on Tax Avoidance and Evasion" (12) and of such similar outgrowth of international bureaucratic lawmaking as the OECD/Council of Europe "Convention on Mutual Administrative Assistance in Tax Matters" (13) and the"Financial Action Task Force on Money Laundering FATF".

        Reminiscent of the Prohibition era, these and such other misdirected OECD bodies as its Forum make a mockery of individual liberty and privacy.  At taxpayers' expense, they constitute Orwellian instruments combating self-serving phantoms chasing newly-found and artificially trumped-up "crimes", such as tax avoidance, "treaty shopping" and "harmful tax competition".  The citizens and the market will be better off without self-appointed, self-serving and out-of-control committes and working parties which have grown beyond the OECD's original purpose and have even been turned against whom they are purpurted to serve.  We will soon find out whether either Congress or the next President has what it takes to bring about the necessary changes - if need be by turning off the spigot which keeps such cancers alive.
 

NOTES

(1)    Germany, Spain, Finland, Canada, United States, Australia, New Zealand, Japan, South Korea and, more recently, Mexico and former COMECON members, joined the OEEC countries to become full OECD members ("Convention on the Organisation for Economic Co-operation and Development", Paris 14 December 1960, on the Internet at:  http://www.oecd.org/about/origins/convention/conventn.htm)

(2)     put into operation on 16 April 1948 upon signature by Austria, Belgium, Denmark, France, Germany (French, U.K. and U.S. Occupation Zones), Greece, Iceland, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Sweden, Switzerland, Turkey, U.K., U.S.  ("Convention for European Economic Co-operation", UN Treaty Series, vol. 886, United Nations New York 1982, p.141)

(3)    "The subjects of every state ought to contribute towards the support of the governments ... in proportion to the revenue which they respectively enjoy under the protection of the state." in: Wealth of Nations, Book V, Chapter II, as quoted in The New Encyclopædia Britannica, 15th edition, vol. 17, Chicago 1976, p.1078, and in The Encyclopedia Americana, International Edition, vol. 26, Americana Corporation New York 1974, p.318.

(4)     as quoted in The Oxford English Dictionary, Second Edition, vol. XVII, 1989, p.679.

(5)    Oxford Advanced Learner's Dictionary, A.S.Hornby, Fifth Edition, Oxford University Press, Oxford 1995, p.1224

(6)    Webster's Third New International Dictionary, Philip Babcock Gove, vol. 1, Merriam Company, Springfield 1971, p.151

(7)    DUDEN OXFORD Grosswörterbuch English, Dudenverlag, Mannheim 1999

(8)    CASSELL'S Germman-English English-German Dictionary, Macmillan, New York 1978, p.178

(9)     PONS COLLINS Grosswörterbuch für Experten und Universität, Klett Verlag München 1999, p.1889

(10)    see also:  http://www.solami.com/billiard.htm

(11)   GRAND LAROUSSE encyclopédique, Paris 1961, p.825: "Evasion fiscale, fait d'un contribuable qui parvient - par des moyens légaux - à ne pas payer l'impôt qu'il devrait payer, sans en rejeter directement la charge sur une autre personne."

(12)    for a more detailed analysis, see: http://www.solami.com/billiard.htm

(13)    on the Internet at:  http://conventions.coe.int/treaty/en/Treaties/Html/127.htm
 

Geneva, 2 April 2000
 

         see also: http://www.solami.com/OECD.htm  and http://www.solami.com/Orwell.htm