Treasure Islands - Nicholas Shaxson [99]
Mitchell pounced on something else. No OECD country—not Switzerland, not Luxembourg, and certainly not the United States or Britain—was on the blacklist.
“The OECD, a rich man’s club of industrialized nations, is launching this anti-tax haven jihad, but they omitted to blacklist their own members,” he said. “They are a bunch of racist hypocrites. Powerful white-governed nations in Europe are targeting less powerful nations in places like the Caribbean. Somebody needs to tell the bureaucrats in Paris that the era of colonialism is over.”25
This time, Mitchell had a point. And he soon got his breakthrough. On May 10, 2001, O’Neill wrote in the Washington Times, a conservative newspaper set up by the Reverend Sun Myung Moon that is a regular supporter of tax havens, that the OECD’s mission was “not in line with this administration’s priorities.”26 The United States, O’Neill continued, “simply has no interest in stifling the competition that forces governments—like businesses—to create efficiencies.” The article looked almost as if Mitchell had written it himself.
The United States, O’Neill added, “does not support efforts to dictate to any country what its own tax rates or tax systems should be.”27 It was the offshore contradiction to end them all. “Don’t interfere with our rights as sovereign states!” the havens cry—while interfering merrily in other nations’ sovereign laws and tax systems.
The OECD’s project was dying. As Marty Sullivan of TaxAnalysts put it, the initiative “slowly dissolved into a series of toothless pronouncements, a mixture of cheerleading and scorekeeping. The OECD started to abandon its confrontational approach.”28 The OECD watered down its blacklist criteria; tax havens were now “participating partners” and escaped the blacklist merely by promising to shape up—and they need only shape up if everyone else—including the hard nuts like Switzerland or Britain or the United States or newly independent Hong Kong—did too. In other words, it would never happen.
Two months after O’Neill’s letter, Senator Carl Levin, fighting a lonely rearguard action, estimated that the United States was losing $70 billion annually from offshore evasion: “a figure so huge that if even half that amount were collected it would pay for a Medicare prescription drug program without raising anyone’s taxes or cutting anyone’s budget.” When Levin noted that fewer than six thousand of more than 1.1 million offshore accounts and businesses were properly disclosed to the IRS, O’Neill’s response was simple and clear.
“I find it amusing.”29
A July 2001 OECD deadline to avoid defensive measures came and went, and the organization later publicly said it had no intention to pursue them in the future. Mitchell’s colleague Andrew Quinlan subsequently warned, for good measure, that just ten days of lobbying could shut down the OECD’s U.S. funding.
The end result is neatly summarized by Jason Sharman, who wrote a well- researched book about the episode. “The OECD,” he wrote, “had to give up its ambition to regulate international tax competition.”30 The tax havens had won.
A lot of the tax havens’ arguments hinge on the rightful scope of state power. Democracies have long supported the principle of progressive taxation, as outlined by the Scottish economist Adam Smith: “It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” In the United States, as in many countries, the principle of progressive taxation has evaporated. It may not seem like that at first glance: The richest 1 percent of Americans paid just over 40 percent of all federal income taxes in 2009. The right-wing Tax Foundation