Dear Mervin,

I have been very pleased to retake contact with an effective and  trusted comrade-in-arms from the memorable INTERFIPOL battle.  Yesterday, I sent you by fax my WSJ piece on that infamous predecessor of the current tax data exchange proposals.  Please find attached my fully hyperlinked response to Mr.Bolkestein’s related edpage piece (FT 10/7/02).  In fact, many
professionals involved in the on-going fiscal and tax data exchange debates may find it useful to look back at the fight over seemingly forgotten fiscal principles which we successfully concluded in the late eighties, when the CBI, the ICC and the Wall Street Journal were in the vanguard of that pro-market, pro-sovereignty and pro-privacy struggle.  And may want to consider joining our current efforts at the UN, OECD, and EU levels  (some related texts are available in French at:  www.solami.com/afrench):  www.solami.com/BOLKESTEIN  ¦  www.solami.com/responses  ¦  www.solami.com/ORWELL

With a view to enlighten and assist your own Finance Minister in his related tasks and decision-making at the forthcoming EU ministerial meeting of December 3 and beyond, you are certainly free to utilize this material as you deem appropriate.  Your own thoughts, ideas and inputs on all this would be greatly appreciated.  And, in the event, I shall be glad to be of assistance to you in related matters.

With best regards

Anton Keller, Secretary, Swiss Investors Protection Association  -  1211 Geneva 2
+4122-7400362

Ill-considered fiscal aberrations

It's reassuring to see the EU's top tax bureaucrat favoring "fair tax competition" as a "useful and necessary constraint on governments to ensure that they spend taxpayers' money wisely"  ("Everyone should pay the tax they owe", FT 10/7/02).  I also "cannot stand cheats or free-riders."  And Mr.Bolkestein might even find fruitful common ground with the simple Swiss, European and World citizen I am, if he were to raise his eyes beyond the related actions and inactions of the taxpayers to those of the states themselves.  And if he thus discovered some states to be - often unwittingly and always self-harmingly - the biggest tax, services and security cheats and free-riders in sight.  For according to the very principles of state formulated centuries ago not least by Adam Smith and Whately, the state may legitimately impose financial or blood sacrifices on its citizens and foreigners - which may seek refuge on its territory for themselves and/or for their wealth - only "in return for the protection afforded by the Sovereign." (as quoted in The Oxford English Dictionary, Second Edition, vol. XVII, 1989, p.679; see also: "The Saint Louis Declaration" of June 2001 on "the fundamental human right for individuals" "to flee political and economic oppression ... and ... to move themselves and their property to nations of other political jurisdictions with levels of taxation and public services compatible with their individual tastes and preferences", World Taxpayers Association, National Taxpayers Union & 31 US and foreign taxpayer organizations, http://www.ntu.org).

Actually, we were here before.  In 1988, the signature of the OECD/Council of Europe Convention on Mutual Administrative Assistance in Tax Matters was boycotted essentially for the same reasons.  Finance ministers worth their salt may thus again awake in time to the self-inflicted damages entailed in the ill-considered tax data exchange scheme which was cooked up behind their back.  Indeed, the rewrapped discredited fiscal data exchange only legitimizes further the taxpayer's individual reaction to his being abused or treated unfairly by tax authorities here and there.  In a time of economic contraction, it amounts to sheer folly to attract foreign investors and then to negate on the advantages and protection offered by selling them out to foreign taxmen.  In doing so, each finance minister would also directly undermine the fiscal sovereignty he's been entrusted with, thus damaging his country's short- and long-term economic interests.

Anton Keller, Secretary, Swiss Investors Protection Association  -  1211 Geneva 2
+4122-7400362  -  swissbit@solami.com  - www.solami.com/gold  -  10/9/02
 

Everyone should pay the tax they owe
By Fritz Bolkestein, Financial Times, 7 October 2002

As an economic liberal, I am in favour of fair tax competition. It is a useful and necessary constraint on governments to ensure that they spend taxpayers' money wisely. But as a democrat, I am a firm believer that individuals and companies should pay all the tax that they owe. I cannot stand cheats or free-riders. Nor can I stand those who make money from the often-lucrative custom of tax cheats.
Within the European Union, we have agreed the outline of a savings tax directive and, before the end of the year, EU ministers are due to adopt this directive definitively. The principle of the directive is simple: to ensure that investors resident in the EU pay tax to the country where they live on interest income from their savings in other countries. After a transitional period of seven years - during which EU countries could choose to impose a withholding tax on non-residents' savings income and share the revenue - all states would be required to exchange information on savers' incomes with the tax authorities of residents' home countries.
As a complementary measure, to avoid tax evaders simply shifting their savings outside the Union, the EU's leaders have decided that member states' overseas territories, such as the Channel Islands, should apply the same measures as apply within the EU. For the same reason, EU heads of state have decided that we should also reach agreement on equivalent measures with the US, Switzerland, Andorra, Monaco, Liechtenstein and San Marino.
At a global level, the importance of effective information exchange as a means of fighting tax fraud is gaining increasing recognition. Recent events have provided new justification for intensifying the fight against fraud and money-laundering. Statements by finance ministers of the Group of Seven industrialised countries, and developments at the Organisation for Economic Co-operation and Development, are a clear illustration of the international trend towards greater transparency.
I have been particularly encouraged by the fact that a number of offshore territories that until recently would have been considered tax havens have now committed themselves to international standards of transparency and the exchange of information on request. The winds of change are indeed blowing through global financial centres. Turning a blind eye to tax evasion is no longer regarded as civilised practice.
Despite this, we have not made much progress so far in our talks with our close neighbour Switzerland. This country has a highly efficient and competitive financial services sector. It has adopted strict controls on money-laundering and co-operates fully in international criminal investigations. Its banks claim that they sell their services on the basis of high quality and no longer need to rely on offering a haven from the prying eyes of the tax inspector. And yet any suggestion of a meaningful exchange of tax information remains taboo with an influential part of Swiss society.
There is an obvious contradiction here. We are asking the most normal thing in the world from the Swiss authorities, namely to help to ensure that EU citizens pay their taxes. I find it difficult to believe that the Swiss government is hesitating to help its EU neighbours to uphold their own laws, including fiscal ones. After all, it is not as if we were asking the Swiss to change their laws, practices or traditions concerning their own citizens.
I realise that reaching agreement with the EU's partners on satisfactory equivalent measures is a tall order. Many within the EU and elsewhere have grown rich by attracting the custom of tax evaders and are not in a hurry to lose that custom. Indeed, some of those calling for the strongest possible measures to fight the evasion of savings tax are doing so in the hope that by setting the standards unrealistically high, they will wreck the whole enterprise.
I am a realist. Opponents of the EU's savings tax initiative may yet succeed. But if they do, it will not be for lack of determination on my part or on the part of the Commission as a whole. If the enemies of this initiative do manage to wreck it, it will become clear who are the friends of the tax cheats and who are not.

The writer is European commissioner for taxation and the internal market