Thursday, September 17, 2009

Senator Carl Levin: tax havens cause resentment, distrust and anger



Senator Carl Levin was in bullish mood when he spoke last night at the annual conference of the Task Force on Financial Integrity and Economic Development here in Washington. "More progress has been made in the past year than in the previous decade", he said, "causing total upheaval in the offshore tax haven world." The recent deferred settlement agreed with Swiss private banking giant UBS was enormously significant, especially since the bank will now be required to advise the US authorities automatically each time when it opens an account for a US citizen. The scale of the backdown by the previously intransigent Swiss "almost knocked me off my chair" quipped the Senator.

Senator Levin has taken a leading role in the combat against tax havens. During his stint as Chairman of the Senate Permanent Sub-Committe on Investigations (which has extraordinary powers to sub-poena witnesses but has no legislative authority) he has led an almost continuous series of investigations into tax havens, their users and abusers. The outcome of his investigations has been the Stop Tax Haven Abuse Act, co-sponsored by then Senator Barrack Obama, and the Incorporation Transparency and Law Enforcement Assistance Act, introduced to the Senate in March 2009. The latter is designed to tackle the lack of disclosure of corporate ownership information in US states like Delaware, which creates massive barriers to law enforcement and encourages widespread tax abuse.

Accusing tax havens of costing the US people up to $100 billion each year in lost revenue, Senator Levin called on the President to support both bills and to steer them through the legislature. "Offshore tax havens are not an inevitable evil" he said, but their activities have a caustic effect on society, stirring up "resentment, distrust and anger." He called on President Obama and G-20 leaders to seize the moment by supporting systems of international sanctions against non-cooperative jurisdictions. "This is about more than raising revenue" he said, "this is about defending the principles upon which our societies are based."

These sentiments resonated well with a conference audience which had spent the day discussing practical steps to strengthen transparency in the financial markets, including country-by-country reporting standards for multinational companies, automatic and multilateral systems for tax information exchange between national authorities, and ownership disclosure for all types of legal entities.

The text of Senator Levin's speech is available here.

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