Mr. John Harrington, Acting International Counsel at the US Department of Treasury testified today before the Senate Finance Committee on the subject of offshore tax evasion. He said the Treasury Department is very concerned about the use of offshore jurisdictions to evade U.S. tax, that there plainly have been abuses in this area, and that Treasury has been aggressively pursuing such abuse and intends to continue doing so. *”We have sought to target our efforts on the sources of abuse and avoid actions that are so blunt that they hinder the legitimate cross-border trade and investment activities, which are so critical to U.S. business and U.S. jobs. Cross-border transactions are now standard business operations, as globalization has led to increased cross-border investment opportunities.”*
Counsel Harrington spoke to a number of issues relating to the Department’s efforts, including regulatory and administrative actions and **information exchange**. On the latter, he maintained that in today’s global economy countries must be able to obtain and exchange the information needed to enforce their domestic tax laws. *”Because access to information from other countries is critically important to the full and fair enforcement of the U.S. tax laws, information exchange is a priority for the United States in its tax treaty program. “*
Mr. Harrington said information exchange is not just a bilateral issue, and that the United States has made great strides in raising international standards.
The Treasury Official pointed out that in recent years, several new TIEAs have entered into force with *”jurisdictions that have figured prominently in previously documented accounts of offshore tax evasion”.* Within the last two years alone, TIEAs have fully entered into force with the Cayman Islands, the British Virgin Islands, The Bahamas, the Netherlands Antilles, Jersey, Guernsey, and the Isle of Man. The US more recently signed a TIEA with Brazil, and the newly signed tax treaty with Belgium reportedly provides greater information exchange than previously achieved with that country.
Mr. Harrington concluded with indication that the Treasury Department is committed to improving tax compliance without unduly burdening honest taxpayers who currently meet their tax obligations. *”Tax compliance with respect to offshore transactions is an important aspect of that endeavor. By focusing on information exchange, we seek to reduce offshore tax evasion while achieving these goals.”*
**Tax Haven Myths**
The Washington-based Centre for Freedom and Prosperity Foundation notes that the Senate hearing’s witness list did not include any persons representing the interests of taxpayers, and the intent was to blame so-called tax havens for the tax gap *”Offshore jurisdictions are routinely vilified, largely because they are perceived as a threat by politicians, leftist organizations, and other advocates of bigger government and high tax rates. In almost all cases, however, attacks on these low-tax jurisdictions are either baseless or distorted.”*
To bring balance, CFP has provided a pre-release copy of a new study it says punctures some of the myths surrounding tax havens and their role in the global economy, entitled **Tax Havens: Myth Versus Reality**. *(see link below)*