Topics of Interest
Money Laundering
Treasury to Pursue Treaties Aimed at Offshore Tax Havens
U.S. Secretary of the Treasury Paul O'Neill has promised
to conclude tax treaties with a group of countries regarded as major
tax havens by July, 2002. The purpose of these treaties, O'Neill told a Senate Governmental
Affairs subcommittee, is to encourage more transparent banking
and tax information from many of the countries identified by the
Organization for Economic Cooperation and Development (OECD) as major
sources for those seeking to avoid taxation or for laundering money
from such activities as drug dealing.
The proposed treaties, which will require accompanying legislation and eventual approval from Congress, will target more than 50% of offshore jurisdictions that currently do not exchange information with the United States to avoid tax evasion, O'Neill said in questioning following his prepared remarks to the subcommittee.
"We need a tax treaty so we can pursue U.S. citizens who are cheating their co-citizens," he said. Both administration officials and banking experts agree that thousands of millions of dollars have been deposited by U.S. citizens in these offshore tax havens, many of which fail to follow basic financial reporting regulations.
Responding to subcommittee Chairman Carl Levin's urging of sanctions for tax havens that avoid adopting transparency measures in their tax systems, O'Neill said the United States prefers to help nations become more transparent but "would look at the prospect of sanctions" if a country does not cooperate.
O'Neill's proposal to pursue tax treaties went further than his prepared remarks, which emphasized progress the United States and the OECD have made in encouraging nations to release the information necessary to prevent tax evasion by their nationals.
OECD defines a tax haven as a jurisdiction that "imposes no or nominal
direct taxes on financial or other mobile services income" and lacks
transparency, "does not engage in effective information exchange," or
"facilitates" entities with "no substantial activities.
Washington, D.C.
July 18, 2001