Waking Up to the OECD
box 2580 - 1211 Geneva 2,  e-mail: swissbit@solami.com ¦ url:  www.solami.com/Orwell.htm
 .../OECD.htm ¦ .../oecdmandate.htm ¦ .../FATF.htm ¦ .../QI.htm ¦ .../glasnost.htm ¦ .../vision.htm ¦ .../diamantball.htm
30 years in the service of privacy and bank client protection
.introduction en français..
I cannot ignore the fact our lowest rate of income tax, 29%,
is above your [proposed] top rate of 27%.
I am worried that some of our scientists,
our biggest wealth creators, may say:
"We can do better for our families out there."
British Prime Minister Margaret Thatcher,
interviewed in the July 28 issue of Forbes magazine,
as quoted in the Wall Street Journal, August 15, 1986

Editor's note  (26 June 1999 - rev.1)  and comments
("Wealth Privacy in the Year Orwell + 16": part I, part II, March/April 2000)

        The U.S. Federal Deposit Insurance Corporation (FDIC) has set out to introduce what some have seen and fought as Orwellian "Know Your Customer" rules (KYC).  According to a close observer, the "banking regulators were so impressed with the volume and quality of the e-mail that they withdrew the proposed regulation on March 23 at a meeting of officials from the FDIC, the Board of Governors of the U.S. Federal Reserve System, the Comptroller of the Currency and the Office of Thrift Supervision" (1).  End of the story?  Not, if experience is any guide.  But for a proper assessment of what's really going on and what, therefore, is likely going to happen under conditions of the free flow of things, you need to look back and decide for yourself.  Notably: whether conditions have fundamentally changed.  What you might thus expect.  And what, in the event, needs to be done.

        The case with which the forces and mechanics at work can fairly well be illustrated is a convention developed under the auspices of the Free World's economic Holy Grail institution, i.e. the venerable Paris-based Organization for Economic Co-operation and Development (OECD), and Europe's human rights vanguard, the Council of Europe.  It is the below-discussed"Convention on Mutual Administrative Assistance in Tax Matters" (2) which, in the eighties, was developed by the secretive OECD "Working Party 8 on Tax Avoidance and Evasion"For reasons also explained below, an international coalition of citizens, chambers of commerce and editors battled it for some two years, and even succeeded to derail its signature - only to completely loose out a few years later, essentially for lack of follow-up and attention.

        Indeed, after some 20 editorials by the Wall Street Journal alone, countless interventions by the International Chamber of Commerce, their national members and other interested associations, not a single government showed up when, on January 25, 1988, this OECD/Council of Europe Convention was officially opened for signature.  Yet, on June 28, 1989, the U.S. Representative put his signature on the dotted line of this symptomatic example of international bureaucratic lawmaking.  Behind the back of concerned lawmakers and privacy advocates - and thus not because but despite of the democratically elected powers - some myopic, yet determined bureaucrats finally managed to collect sufficient signatures and ratifications to sneak this convention into force - tellingly on fool's day of 1995.  According to the official tally (3), this Orwellian tentacle has by now become binding "only" for Denmark, Finland, Iceland, Netherlands, Norway, Poland, Sweden and the United States.  The trouble, though, is that this has made "respectable" what some consider to be fiscal aberrations, all cooked up secretively and undemocratically by mutually back-scratching, unsupervised and self-serving One Worlders.  As a consequence, the related debates and practices in all OECD countries have already been infested and corrupted with intolerable, for patently anti-liberty, anti-privacy and anti-market norms, with worse to come, not least in the economic arena of the future, the Internet field of e-commerce.

        Indeed, the authors of this anti-citizen INTERFIPOL convention thus not only managed to snatch victory from defeat.  They also turned this experience into a learning tool for developing and fine-tuning their anti-privacy skills on other fronts.  For a few years they layed low, "improved" the confidentiality of the work at OECD and concentrated their forces on less attackable, yet similarly anti-privacy and anti-entrepreneur measures, which are ostensibly needed to fight genuinely criminal activities. As a result, we are now faced with a growing arsenal of innocent-sounding, yet devastatingly effective anti-democratic, anti-sovereign and anti-enterprise "aoft laws", like "recommendations" and "guidelines"(2)(4)(5) against "harmful tax competition", "tax avoidance", "tax havens", bank client privacy, bank secrecy, etc.  Moreover, international fiscal and other data exchanges are turned into powerful instruments and weapons for use not exclusively against criminals but routinely against ordinary citizens and enterprises engaged in perfectly legal activities.  Not surprisingly, the "enforcement arms" ostensibly created to fight an ever growing palette of modern versions of Prohibition - notably the Financial Action Task Force (5) - differ only in name from what one would expect from supranational police forces.  In practice at least, these modern bounty hunters find themselves encouraged to treat a priori any bank account holder anywhere and even sovereign nations as fair game for being snooped on, harrassed and deprived of the fruits of their labors - until, eventually, proven "innocent" of "tax avoidance", "harmful tax competition" and other aberrant OECD and FATF One World "crimes".  After over ten years of writing and sneaking their own mandates into little-noticed summit and other official texts, they find themselves empowered by the OECD, the G7 ministerial meeting of industrial states, the IMF and other intergovernmental bodies to act as international policemen on all money matters, criminal or not.  Mostly by default of the legitimate power holders and worth-their-salt bankers, they thus managed to devise and use ways and means to operate outside the control of constitutional supervisors.

    Unless cut out or cut back at the source - notably on the OECD funding level and/or through appropriate changes in the terms of reference of some OECD bodies - this development is likely to continue and even to intensify, regardless of a manifest incompatibility with OECD's statutory aims and obligations.  I.e. as long as the purpurted gains - if there are indeed any worth talking about - will not by far and undeniably be outweighed by the damages thus incurred by OECD members' citizens, commerce and economy, e.g. through reduced foreign investments in the U.S. economy and indeed to the market system as a whole.  With, on top of it, American tax collectors being obliged to serve also as the extended arms of the taxmen from high-tax rate countries like, say, Sweden, Belgium or Netherlands.

(1)Fred E.Foldvary, "Protests Squash 'Know Your Customer'", The Progress Report, at:  http://www.progress.org/fold83.htm, quoting a New York Times article of March 24, 1999: "Flood of E-Mail Credited with Halting U.S. Bank Plan";  see also: "International Bankers Advisory Board KYC letter to the Federal Reserve System" of March 8, 1999, at:  http://www.csbsdal.org/legreg/intlkyc.html; American Bankers Association comments of January 28, 1999, to the U.S. Banking Regulators on the proposed "Know Your Customer" Rules, at: http://www.aba.com/aba/static/KYC_Commentltr.html; "Banking Institutions Lower the Boom on All Accounts - 'Know Your Customer' Part of Agenda for Global Control", at: http://thewinds.org/archive/government/fdic12-98.html; "Good Guys Win One - 135,000 Objections to KYC and Counting", at: http://www.networkusa.org/fingerprint/page1b/fp-kyc-goodguys.html; and: "'Big Brother' U.S. plans to spy on all your bank activities", at: http://www.gototravel.cx/U.S._PLANS_TO_SPY_ON_ALL_YOUR_BANK_ACTIVITIES.htm

(2)    full text at:  http://conventions.coe.int/treaty/en/Treaties/Html/127.htm
   texte français: http://www.coe.fr/fr/txtjur/127fr.htm

(3)    convention status (English & français) at:  http://conventions.coe.int/treaty/en/Treaties/Html/127.htm

(4)"Harmful Tax Competition: An Emerging Global Issue", OECD May 1998, ISBN 92-64-16294-1, at:  http://electrade.gfi.fr/cgi-bin/OECDBookShop.storefront/

(5)THE FORTY RECOMMENDATIONS OF THE FINANCIAL ACTION TASK FORCE ON MONEY LAUNDERING", OECD, at:  http://www.oecd.org/fatf/, and the "Interpretative Notes", at:  http://www.oecd.org/fatf/Inter_notes.htm


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Des deux côtés de l'Atlantique on retrouve les mêmes problèmes liès à la confidentialité

Victimes du fisc de tous les pays, unissez-vous!

Aux Etats-Unis et en Europe, les défenseurs de la "privacy"
vont probablement s'allier contre l'inquisition de la puissance publique

Richard Anderegg, AGEFI, 4 janvier 2000 (*)

"Le FinCEN collationne les listes de suspects
des douanes, du fisc et d'autres agences fédérales
sous prétexte de combattre le blanchiment:"

    Depuis le chahut de Seattle, le doute n'est plus permis: Ceux qui s'opposent au nom de droits individuels et de valeurs locales à une "globalisation" qui se veut égalisatrice reprennent du poil de la bête.

    Il y a quelque temps déjà que cette résistance s'accentue.  Aux Etats-Unis, on a vu, au printemps passé, la défaite surprenante à la Chambre des représentants d'une loi nommée Know your customer, connais ton client.  Cette loi obligeait les banques à surveiller qu'il n'y ait pas de transactions même simplement douteuses dans les comptes qu'elle gère.  Loi dure: Dès qu'une seule transaction paraissait mal compréhensible, elle devait remettre aux autorités le dossier entier du client.  En plus, le Ministère des Finances entretient déjà un réseau, FinCEN , (Financial Crime Enforcement Network) qui note les noms de propriétaires de comptes qui paraissent interessants, sans qu'il y ait, pour l'instant, trace de crime.  Pire encore: FinCEN collationne les listes de suspects des douanes, du fisc et d'autres agences fédérales, le tout devant servir à combattre le lessivage de l'argent et le crime organisé.

Le gouvernement veut faire avaler à petites doses ce qu'il n'a pu faire avaler d'un coup

    C'est un individualiste, Ron Paul, médecin et représetant texan, qui a monté un tollé, ralliant une majorité qui découvrait que les agissements du ministère violaient la constitution et la sphère privée des citoyens américains.  Le gouvernement, pour sa part, découvrait un mécontentement profond contre  ses ingérences.

La réaction des autorités a été double:  D'une part, le ministre des Finances, M. Summers, a fait des déclarations qui défendent le droit du citoyen à une sphère privée.  Le Comptroller of the Currency (Vérificateur des Comptes), John Hawke, dans une allocution à une fédération de consommateurs, en décembre, disait "Le droit à une sphère privée (privacy) est devenu un facteur clé de la concurrence".  On choisit l'entreprise, le commerce qui garantit la discrétion, et les clients des banques surtout "ne s'attendent pas à ce que leurs banques soient
les yeux et les oreilles de la surveillance gouvernementale."

    Mais d'autre part, les collaborateurs des Représentants qui ont défait Know your customer savent que les appels du pied aux leaders du votre négatif que lancent la Trésorerie, le fisc et les agences qui appliquent la loi dans le monde de la drogue et du lessivage, se font de plus en plus urgents.  Les émissaires du gouvernement veulent faire changer d'avis ces parlementaires.  Les assistants législatifs de la Chambre croient que le gouvernement essaiera, dès l'année prochaine, de revenir à la charge avec des lois partielles pour réintroduire par portions ce qui a été repoussé dans son ensemble. Au sujet des belles déclarations gouvernementales, ils sourient: "C'est politique de dire ça avant des élections."  Ils n'y croient pas.  Ils voient plus loin.

Une croisade contre les empiétements des gouvernements est nécessaire

    Il y va de la privacy des dossiers médicaux, du e-mail, de tout ce que le gouvernement voudrait tant surveiller.  On va se bagarrer.  De l'autre côté de l'eau, l'est l'effort de l'OCDE (Organisation de coopération et de développement économiques) pour éliminer la "Concurrence fiscale dommageable" qui crée une méfiance semblable chez ceux qui croient que les Etats devraient pouvoir utiliser une politique fiscale intelligente pour attirer les investisseurs.  Comme la Trésorerie américaine, l'OCDE a mis en marche des polices dont la base légale prête au doute.

    La Suisse en particulier se sent visée par une organisation qui veut éliminer les "paradis fiscaux", le secret bancaire et les privilèges locaux.  On n'est pas content au Luxembourg et en Grande-Bretagne non plus.  L'OCDE n'est d'ailleurs pas "européenne".  Les Etats-Unis en font partie, leurs impôts passent à la casserole comme ceux des Européens.  Ils y sont même les plus forts, quoiqu'en Amérique, les citoyens ne s'en rendent à peine compte.  Mais lorsqu'on parle à des législateurs ou des politiciens américains qui savent ce qui se passe (d'accord, ils ne sont pas légion), on trouve une grande compréhension.  Les victimes américaines du fisc, de cet IRS bien connu, et des sbires de la Trésorerie ont les mêmes problèmes que celles du "Groupe de travail sur la fraude et l'évasion fiscale" de l'OCDE.

    Alors la question se pose: Pourrait-on échanger des informations, des conseils, déclencher ensemble des campagnes de pression politique?  Il y a des gens (de nouveau, ils ne sont pas légion), qui le croient.

(*)    du même correspondant de l'AGEFI à Washington, voir aussi: "La loi doit mieux soutenir la propriété privée, anonyme et non divulgée", AGEFI,  6 décembre 1999

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Seuls les poissons morts ne nagent plus contre le courant

Interview avec Anton Keller  (*)  mené par Richard Anderegg à Washington le 29 décembre 1999
(publié dans l'AGEFI du 4 janvier 2000, sauf les phrases en parenthèses rectangulaires,
sous le titre: "Luttons contre les forces hostiles au secret bancaire!")

Qu’est-ce c’est que cette "concurrence fiscale dommageable" dont on parle à Paris et à Bruxelles?

C’est le cache-sexe le plus en vogue parmi ceux qui en veulent aux "paradis fiscaux" – sous-entendant les places financières comme la Suisse.  La plus grande menace s’exerce actuellement par le biais de l’OCDE (Organisation de coopération et de développement économiques).  Cette dernière mène une véritable guerre économique larvée pour niveler vers le haut les charges fiscales en cherchant à supprimer ce qu’elle nomme – sans les définir -- les "distortions fiscales néfastes".  Le Conseil de l’Europe et l’Union européenne participent à cette razzia au mépris des libertés fondamentales.  Ils s’appuient sur les travaux d’un comité clandestin de l’OCDE qui se nomme "Groupe de travail sur la fraude et l’évasion fiscales".  De ce fait, la place financière suisse se trouve menacée par de sérieuses pressions extérieures, qui sont en plus accentuées par des défaillances intérieures.

Comment expliquer cela de la part d’organisations chargées de promouvoir les libertés individuelles?

Pour les autorités fiscales du monde entier, presque tous les moyens sont bons dans leur chasse aux nouveaux revenus.  Coiffant le chapeau de confrérie internationale, ces fonctionnaires nationaux agissent hors contrôle et forment une masse critique redoutable.  Ils se servent des organisations internationales gouvernementales pour influencer les législations nationales.  Ils arrivent ainsi à faire criminaliser des activités économiques ordinaires, voire indispensables, et n’hésitent pas d’abuser de la lutte justifiée contre le crime organisé afin de réduire à néant le secret bancaire.  Ils ont déjà réussi à faire mettre en place une police financière internationale, la Financial Action Task Force (FATF)de l’OCDE.

La Suisse, en tant que membre de plein droit de l’OCDE, aurait une position privilégiée pour influencer et freiner des développements qui nuisent à l’esprit d’entreprise, à la souveraineté fiscale et au système du marché tout entier.  Ses représentants, soumis à des pressions de tous bords, ont souvent été excessivement prudents.  Dans quelques cas clés, cette prudence résultait même d’instructions peu réfléchies, qui avaient été inspirées par des intérêts particuliers.  [Par exemple, dans le cas de l’Avenant franco-suisse du 11 avril 1983, les organisations faîtières suisses de l’industrie et de la finance avaient réussi à faire passer les intérêts de quelques grandes banques avant ceux de l’économie dans son entier.  Même le Conseil fédéral avait déjà apposé sa signature sur la ligne pointillée de l’Avenant.  Néanmoins – et chose rarissime -, le Conseil national, in extremis, a refusé même l’entré en matière sur cette "trahison économique".  Ainsi il a suivi l’argumentation d’une opposition extraordinaire des contribuables et cantons lésés.  Cette opposition était appuyée par le Groupement des banquiers privés genevois qui, à cette époque, était encore dirigé par une vraie sentinelle du sanctuaire du patrimoine.  Voilà pour les défaillances intérieures que j’ai mentionnées.]

Vu les pots cassés de ces derniers temps, quelles sont les conséquences que la Suisse a tirées?

Selon mes observations, on est loin d’avoir appris la leçon.  Les défaillances continuent.  On se limite aux voies traditionnelles, on refuse de coordonner les efforts et on n’admet pas la nécessité de se doter des moyens adéquats.  Prenez la menace actuelle: elle a ses origines dans la soi-disante INTERFIPOL, la Convention concernant l’assistance administrative mutuelle en matière fiscale"Complot orwellien" selon le Wall Street Journal du 7 juillet 1986, elle était l’objet d’une campagne d’opposition exemplaire: lors de son ouverture à la signature, le 25 janvier 1988, aucun gouvernement n’était présent.  Mais ce succès était gaspillé par inattention et inaction, permettant aux promoteurs de cette convention d’aller cueillir les signatures une à une jusqu’à son entrée en vigueur en 1995.  Ceux qui étaient chargés de la défense de la place financière suisse en portent une lourde responsabilité.  Ils ont raté plusieurs occasions de s’y opposer, soit par un véto formel, soit par des démarches adéquates.  Ils se sont contentés d’élégantes déclarations de principe et ont refusé de signer.  Manifestement, la Suisse ne peut plus se protéger des conséquences de tels "complots orwelliens" par les seules politesses d’usage.

Or, l’histoire se répète maintenant avec les mêmeserreurs d’action et d’omission face à l’actuelle campagne de l’OCDE contre la concurrence fiscale dommageable.  Résultat: on risque de transformer davantage encore nos banquiers en auxiliaires de la police.  Cela au moment même où les lois bancaires américaines sont en évolution vers une meilleure protection des clients.  Au moment où la compétition internationale pour les services bancaires est menée de plus en plus durement.  Et au moment où les Etats-Unis pourraient bien redevenir le plus grand paradis fiscal du monde -- et cela indépendamment du résultat des élections présidentielles de novembre prochain.

Alors, quelles options voyez-vous?

La guerre économique nous a été déclarée en 1974 dans un rapport du Sénat américain, menaçant les paradis fiscaux et les pays pratiquant le secret bancaire comme la Suisse, textuellement, d’"economic warfare", de guerre économique.  Il est temps d’en prendre acte et d’agir en conséquence, en nous alliant à des camarades de combat fiables.  Parmi eux, quelques législateurs et autres américains pourront même jouer un rôle clé.  Les consultations que je viens de mener à Washington m’encouragent dans ce sens.  Dans ce pays dynamique, rien n’est jamais définitif.  Une lame de fond en faveur du sanctuaire du patrimoine ("wealth privacy") menace toute la culture du "big government".  Le 23 mars 1999, la Chambre des représentants a fait échouer le dernier essai d’imposer un contrôle orwellien sur la totalité des transactions d’un compte au moindre soupçon.  Cette décision législative est indicative, mais non concluante.  En fait, le gouvernement n’a pas abandonné ses efforts qu’il prétend indispensables pour combattre le crime organisé.

Dans cette situation, l’expérience et les services de la Suisse en matière de secret bancaire pourraient être utiles pour appuyer nos amis américains dans leurs efforts législatifs de réaliser une protection efficace des clients bancaires.

Comment une telle alliance pourrait-elle nous aider dans la "guerre économique" dont vous parliez?

Mes interlocuteurs me font croire qu’il y a matière à changer la donne à l’OCDE, c’est à dire au centre même de nos préoccupations.  Une campagne des deux côtés de l’Atlantique, inspirée des principes qui sont à la base même de l’OCDE, semble en effet réalisable.  A condition, bien entendu, qu’elle soit menée par des gens qui font partie de la solution et non du problème.  Mon souci d’efficacité exige que je ne vous en dise pas plus.

(*)    Secrétaire de l’Association suisse de défense des investisseurs, Genève (e-mail: swissbit@solami.com).  Anton Keller est un conseiller parlementaire spécialisé en matière de droit bancaire, de sphère privée ("sentinelle du sanctuaire du patrimoine") et de questions énergétiques.  Il édite un site internet (www.solami.com/privacyhome).  Il a pris contact à Washington avec des membres du Congrès, du gouvernement et de groupes de pression.

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July 7, 1986
Waking Up to the OECD

        One of the things to which the Reagan administration needs to wake up is the fact that its new tax reform is going to turn the U.S. into a tax haven.  A top marginal rate of 30% or below will look like a veritable engraved invitation to those who work hard for their money to move it into the U.S., where it won't be taxed at the confiscatory rates prevalent in places like Europe and the more dismal parts of the Third World.  This is extremely good for an America that wants and needs all the savings and investment it can get.  But a plot is afoot to deny America these benefits - a plot which the Reagan administration has the power to stymie, if it starts to act.  The plot is unfolding in the Organization for Economic Cooperation and Development.  This normally benign organization has for several years now been drafting - in secret - a convention that would open the door to foreign tax collectors meddling in each others' countries.

        ... So the U.S. collaborated in the OECD's efforts, hoping to make things easier for its tax collectors.  Now the shoe is being shifted to the other foot, and the cash is going to be flowing - has already been flowing - to America.  It would be one thing if the convention under discussion were aimed solely at stopping the kind of criminal tax evasion we all abhor.  But the thing for the U.S. to understand is something Europeans have understood for years: Not only are tax rates high in Europe, but tax authorities are often politically motivated and corrupt.  So tax havens can emerge as more than the market place's answer to onerous imposts.   They can be seen, in many cases, as  redoubts where an individual can escape real fiscal injustice.  If the OECD convention is allowed to go forward, the U.S. will have all sorts of tax collectors going on fiscal fishing expeditions in the U.S. itself.

May  9, 1986

European Taxmen Plot an Orwellian Scheme
 A proposed tax convention provides no limits to prevent a witch hunt
against people engaging in perfectly legitimate international commerce.
        BASEL - Although the Pennsylvania Turnpike will get you across the state quicker, some people opt for alternative routes to avoid paying the toll.  Similarly, New Yorkers will travel to New Jersey to buy their clothes, because New Jersey has no sales tax.  Imagine the outrage that would ensue were the government to require that New Yorkers buy all their clothes in New York and drivers in Pennsylvania use the toll road.  Indeed, avoiding tolls and other taxes has always been a citizen’s right.  A market-oriented society can even be defined by the individual's freedom to work out the best available, economic advantages for himself, including tax advantages at home and abroad.
        Were governments to discourage and even prosecute tax avoiders they would undercut the foundations of Western societies in favor of a sort of socialist leveling.  Yet this is precisely what is happening right now - more or less unnoticed and therefore hardly opposed - in and between a growing number of countries.  The nations involved are not corrupt Third World states.  Nor are they Communist dictatorships.  They are the free industrial democracies of Europe and North America.  If some fiscalists have their way, an American company installed in, say, France would automatically trigger a tax data exchange between the U.S. and French authorities when it conducts its business through one or more countries in such a way that a saving in tax may result.  Such attempts to give greater powers to tax prosecutors threaten to transform the most prosperous parts of the globe into an Orwellian landscape.
        The most striking of these attempts to prevent citizens from making the best economic deal for themselves comes, of all places, from the Organization for Economic Cooperation and Development.   Back in 1977, a small group of narrow-minded and determined fiscalists managed to manoeuver an unsuspecting OECD council formally to recommend that member countries beef up "their powers of investigation for the detection and prevention of tax avoidance and evasion."  The inclusion of the word "avoidance" signaled serious potential problems for business and individuals.  Increased government power could be achieved, the OECD council recommended, by "making more intensive use of international conventions or instruments in force and by seeking new arrangements of a bilateral or multilateral character."

 Secret Work

        Not to be bested on its own turf of extra-constitutional lawmaking by unelected technocrats, the United Nations promptly followed suit.  In December 1983, a U.N. group of experts presented a corresponding, detailed set of "Guidelines for International Cooperation to Combat International Tax Evasion and Avoidance."
        Between these two events came an even more significant coup.  Members of the Committee of Experts on Tax Law (known by the French acronym CJ-FI, not to be confused with the CJ-IT, which is secretly preparing a convention on insider trading) convinced the Council of Europe to give them the mandate to draft a "multilateral convention on mutual assistance to prevent international tax avoidance and evasion."  After years of working in utmost secrecy, the CJ-Fl prided itself on offering the under-administered world a convention that goes beyond simple methods of preventing international tax avoidance and evasion.  This convention provides for "extensive cooperation between tax authorities in administrative matters."  What we have here is not merely arranging for help in prosecuting crimes: what we have in practice is a call for "automatic" and ''spontaneous" exchanges of taxpayer data, through the most effective means available, including "telex, telephone and exchange of magnetic tapes."  It may also involve "measures taken by judicial bodies," for example, the seizure of assets, prosecution and police interventions within and beyond national borders.
        Only a fey months ago the involved governments received the final version of this group’s innocent-sounding "Draft Convention on Mutual Administrative Assistance in Tax Matters."  Dubbed the "INTERFIPOL Convention" - a play on Interpol, the international police force - this tightly guarded fruit of years of clandestine legislative work is scheduled to be adopted in September simultaneously by the OECD and the Council of Europe.  It will then be "opened for signature" by member countries, whose parliaments may then rubber-stamp it to preserve the appearance of constitutional lawmaking.
        The draft obliges signatory states to render assistance on "(a) exchange of information, including simultaneous tax examinations and participation in the tax examinations abroad;  (b) assistance in recovery, including measures of conservancy; and  (c) service of documents."  This blanket obligation - which would mean a further bloating of fiscal bureaucracies - covers all tax matters and is not limited to suspected cases of tax fraud, tax evasion or even mere tax avoidance.
        Again, this goes beyond simply setting up a framework for pursuing actual criminals.  The 278-paragraph explanatory report specifically leaves that to other conventions, saying "action by judicial bodies carried out pursuant to criminal law and intended to punish criminal offenses committed in the tax fields does not . . . fall within the scope of application of the present instrument."  Thus what’s going on here is a general onslaught on the fundamental principles of sovereignty and individual rights.  The sole justification for this is offered in the preamble.  There it is stated "that the development of international movement of persons, capital, goods and services, although highly beneficial in itself, has increased the possibilities of tax avoidance and evasion and therefore requires increasing cooperation among tax authorities."
        The INTERFIPOL Convention provides that in some cases "contracting states shall automatically exchange the information."  These cases include tax assessment and collection, as well as prosecution before an administrative authority or the initiation of prosecution before a judicial body.  Moreover, the convention requires member states to provide upon request any information in these areas concerning particular people or particular transactions.  On top of this, if the tax files do not yield the appropriate requested information, then the nation receiving the request is obligated to "take all relevant measures to provide the applicant state with the information requested."
        But that’s not all.  The proposed convention even covers the transfer of information that had not been requested. Under its terms a nation would be obligated to send information if it believes that the other state may be losing tax money, that someone is using its laws to avoid paying taxes in his own country and thus increase the tax burden there, that business has been conducted in a way to take advantage of tax laws, or that artificial transfers of profits within groups or enterprises are being made to save on taxes.
        Finally, the document virtually eliminates national borders.  Upon request, one nation may allow tax authorities of another nation to be present during any tax investigation.  Lest the ultimate aim of all this be missed, the document's drafters spell it out unequivocably:  Under the terms of the agreement, a state must "take the necessary steps to recover tax claims" of the state requesting help "as if they were its own claims" (my italics).
        The INTERFIPOL Convention also gives binding definitions of various terms, even including under the category of taxes "compulsory social security contributions payable to general government or to social security institutions established under public law."  Yet it remains tellingly and purposefully silent on the key terms "tax avoidance" and "tax evasion," saying only that both require "increasing cooperation among tax authorities."  It is but a short step from this to an invitation to "legally" discriminate, pressure and subdue any businessman who has the bad luck to fall into disfavor with the government of the day.  For there appear to be no limits and no redress mechanisms to prevent a witch hunt or fishing expedition against people engaged in perfectly legitimate international commerce.

Fake Safeguards

        The convention's authors didn’t completely forget their basic obligation toward their taxpayers, which is to protect them against foreign taxations in return for their tax payments.  Accordingly, the preamble calls for states "to protect the legitimate interests of taxpayers, including appropriate protection against discrimination and double taxation."  There are even articles purportedly serving that noble aim.  At least, they carry the assuring titles: "Protection of Persons and Limits to the Obligation to Provide Assistance" and "Secrecy."  But on closer analysis, these safeguards turn out to be fakes, for they give little more than lip service to the principles invoked.  They fail to mask the police and fiscal mentality that gave birth to this assault on enterprising humans in the first place.
        Fortunately, all this has not gone entirely unnoticed; it's receiving what is doubtless unwanted attention in the more enlightened circles of OECD member countries.  True, the White House representative to the OECD last July still didn't take kindly to the Swiss government’s commendable side-tracking of the ill-advised OECD ''recommendation" to lift banking secrecy for tax authorities.  But in the wake of some resounding popular votes, the Swiss government seems more than ever intent to speak up for the embattled taxpayers.  The governments of Ireland, Italy, Liechtenstein, Luxembourg and Portugal have already voiced their support for opposing this convention.  Will other principled parliamentarians and government leaders also rally around in time to force an end to this alarming piece of self-serving, bureaucratic lawmaking?
Mr. Keller is secretary of the Swiss Investors Protection Association
e-mail: swissbit@solami.com
for convention text, see: http://conventions.coe.int/treaty/en/Treaties/Html/127.htm

May  9, 1986

Off Base at the OECD

        Some months ago we had a particularly pleasant lunch in Paris at he home of the American ambassador to the Organization for Economic Cooperation and Development.  One thing that made it so was the enthusiasm the U.S. mission is bringing to awakening the OECD to supply-side approaches to European problems.  Suddenly, the OECD's reports seem full of talk about tax cuts and free market reforms.
        So it's all the more reason to view with alarm the report, appearing in the adjacent columns, of a campaign against tax avoidance thus is quietly gathering steam within the OECD bureaucracy.  The idea is not merely of governments to cooperate in going after real tax criminals who fraudulently evade imposts. The OECD seems to want to target individuals who only seek to avoid taxes by working, banking or investing in low-tax countries.
        The net result of a campaign against tax avoidance would be to subject corporations and individuals to endless investigation and harassment by high-tax states, whose confiscatory fiscal nets millions seek to avoid by entirely legal means.  This is particularly true in Europe, where tax rates vary so widely.  The author of the adjacent-article, H.Anton Keller, has a bird's eye view of this problem from his perch in Switzerland.  Lots of people work, live, or bank in Switzerland to take advantage of its favorable fiscal climate.
        Switzerland is an interesting case.  It helps foreign governments go after suspects and evidence in Switzerland, if the individuals are suspected of doing things that both Switzerland and the foreign government deem to be criminal.  But Switzerland doesn't help foreign governments go after information and individuals in Switzerland if no crime is suspected or alleged under Swiss law.  What the OECD is hatching is a set of principles that would allow governments to pry even when no crime is being investigated.
        Proponents of administrative cooperation in tax matters argue that honest earnings wouldn't be jeopardized.  But that assurance is subject to some considerable doubt.  The agenda here is to end the perfectly legal practice of tax avoidance, and it's distressing that Switzerland is practically alone in sounding the alarm.  The problem that confronts the OECD member countries is not that governments are chary of sharing tax information.  It's that many of them - France, Italy, Ireland, Belgium, the Netherlands, Denmark, Sweden, to name a few - have tax rate schedules that extract outrageously high percentages of earnings above certain levels: thereby discouraging work effort and encouraging avoidance.  The way for the OECD to help is not to work at expanding government regulation but to press on with the supply-side case for tax reform.

July 11, 1986

A Clarification

        ... When we suggest the OECD is operating in secret on this [INTERFIPOL] tax convention, we don't mean secrecy in the benign sense.  We mean secrecy in the fundamental sense of anti-democratic behavior that governments turn to when they want to do something behind the backs of the voters.
        To be fair here, a lot of the blame rests with the member governments, including the U.S., whose State Department hasn't - and won't - recognize the blunder that's involved in this tax convention.  That won't be apparent until the document hits the U.S. political level, namely the White House or the Congress where there are people who understand about taxes.  Then there'll be a flap and the funding of the OECD itself will come up in the discussion.  The thing will probably drag on for a few months or weeks.  But the momentum that has been built up within the OECD and the State Department, which have invested five years of secret work on the treaty, will likely carry the day.  And one day the American people will wake up with an Italian, say, or a Greek or French tax collector poking through their bank accounts.

August 1, 1986

Switzerland to the Rescue?

        ... First is the violation of the principle of tax secrecy. ... The second flaw is that the [INTERFIPOL] convention gives too much power to the state. ...
        Next is what the [Swiss] statement calls "the absence of essential legal institutions." ...  Fourth, the professional organizations object to the multilaleral character of the convention, which they say wouldn't work in the absence of "extensive legal harmonization."
        ... From such sound advice it follows quickly that this ill-advised convention deserves to be stopped cold.  We'd have tought the Reagan administration would be taking the lead, particularly as the U.S. is about to pass a tax bill that will make it a major haven from wrongful and excessive taxation. ...

December 3, 1986

Sneak Treaty?

        . . .  The [INTERFIPOL] convention empowers tax officials in all the signatory states to go on fishing expeditions in other countries - even where no crime has been alleged.  Consideration of the tax convention had been delayed until today for technical reasons.  In between, however, the International Chamber of Commerce sounded the alarm, and it would be a prudent move were the ministers to delay action on the proposed convention until a later date.  In the time gained, it would pay all Council of Europe members and those of the OECD, particularly the U.S., to take a hard new look at the treaty - a relic that should have been disposed of years ago.
        The OECD proposal would grant extensive new powers to state tax officials, giving them the right to request information on an individual or business firm that merely chose to bank, invest or work in an area where the tax laws were more favorable.  This is not the same as tax fraud, which even states like Switzerland recognize as a crime and pierce their banking secrecy law for.  The legal and economic nightmares such a pact would unleash by allowing state officials to poke into anyone's finances are enormous. ...
        It's not only big businessmen and Swiss bankers who have reservations.  Even high-tax countries like Britain and France reportedly are having second thoughts about subjecting their citizens to the grasp of tax collectors of Greece, say, or Germany. ...
        According to article 30, no other reservation may be made aside from those listed.  So governments are going to have to take it or leave it as the document stands.  With any chance for moderation eliminated by the document itself, what is left is a proposal too rigid and regulatory even for Europe's tax-happy governments.

January 8, 1987

Secretary Shultz's Fumble

        ... Tax avoidance is one of those phrases that has a negative sound.  The concept is particularly irksome to socialist governments that enforce high marginal tax rates and want to trap potential taxpayers.  But avoiding taxes is perfectly legal, if fraud isn't involved.  Tax avoidance is actually a fundamental process of any market system.  It is the process by which the participants in a market economy, be they individuals or corporations, go price-shopping for government services.  No one has a greater stake than the U.S. in ensuring that this process be allowed to continue throughout the Free World - particularly now that the U.S. has enacted the lowest marginal rates in the OECD.
        Word that the Reagan administration is fumbling the ball comes in the form of a U.S. State Department telegram. ...  The proposed [INTERFIPOL] treaty covers three areas of mutual assistance: the exchange of information, the service of documents, and the collection of actual taxes.  The U.S. Treasury, the Shultz cable suggests, is nursing reservations on the latter two areas of potential assistance - but not, it appears, over any effort to protect the right of Europeans and Americans legally to avoid taxes. ...
        It is a principle of the laws of extradition that one country will not extradite to another for something that is a crime in only one of them.  A parallel argument could be made that the U.S., say, need not serve up to the tax collectors of foreign powers funds the U.S. itself wouldn't tax.  Europe has long understood this. ... The energy directed at this effort, in all countries, would be far better spent addressing the real root problem here - high marginal tax rates in Europe, arbitrary and politically motivated collection of taxes in some countries, and unjust exchange controls that cause so many people to try to shelter their money in other jurisdictions. When these problems are addressed the OECD's treaty won't be needed.

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