Retiring Supreme Court Justice Sandra Day O’Connor wrote an opinion in the John Doe summons case which acknowledged that the Court had "sounded the death knell for Boyd," which Justice Brandeis had said was a case that "will be remembered as long as civil liberties live in the United States." In 1885, the case of Boyd v. United States struck down a tax law which forced taxpayers to bring in their records for examination. Said the Court:

And any compulsory discovery by extorting a party’s oath, or compelling the production of his private books and papers…is contrary to the principles of a free government. It is abhorrent to the instincts of an Englishman; it is abhorrent to the instincts of an American. It may suit the purposes of despotic power; but it cannot abide the pure atmosphere of political liberty and personal freedom.

Not only has the Court sounded the death knell for Boyd, this generation has done so as well.. Every generation has the right and general does toss out many beliefs of the generations that went before. Most of us accept the right of the government to snoop into all our affairs, especially our financial ones. Today, governments see no problem in destroying the right of privacy in your financial affairs. They use an innocent name for this, calling it "transparency," such as when the Oklahoma City bombers called their murders "collateral damage." The quote above from Boyd makes it clear that the "instincts" of an American or an Englishman, were with another generation. We have no such instincts today.

Today the Organization for Economic Cooperation and Development (or OECD), a Paris based European dominated organization presently on a world-wide campaign to destroy financial privacy everywhere by blackballing tax havens and their banking privacy. The OECD’s policy is to ban them from using the banking systems of Europe. It seems in today’s modern world that tax havens are infidels in a world of high taxes. Any country having low taxes, or no taxes at all, is suspect as having harmful tax practices should it maintain banking privacy for its customers. It has been believed that, until the OECD presented us with a new definition of "harmful taxes,” that harmful tax practices were taxes that were too high, which drove both businesses and people to move to lower tax realms (such as the state of California forcing businesses and people to move to Nevada or Arizona). Now the OECD’s philosophy would seem to say, that Nevada and other states are engaging in harmful tax practices, by luring businesses to come and operate in a lower tax environment.

It was once believed that high taxes were a threat to liberty, such as when Thomas Paine extolled the virtues of America, as a "Land of liberty because it was a land of low taxes." During the Civil War, in 1861 a British writer in the Quarterly Review saw the tragedy of the American Civil War, because America was a shining example to the world: it had a government that was cheap and taxes that were low, which attracted people from Europe to immigrate and live in America. By OECD definition, America was engaged in harmful tax practices that drew people away from Europe’s high tax governments that were in need the money. And this is not unlike what tax havens do today to countries that have high, specifically the countries which comprise Europe’s welfare state societies.

The OECD view of "harmful tax practices," has more to it than low taxes. The OECD seems to be saying that if every nation had high taxes, the world would be a better place. The term "level playing field" shows up all the time in the rhetoric of the OECD, and it is a complaint of the tax havens themselves. They argue that even the OECD had tax practices forbidden by them, such as bearer shares, which are popular in some of the high tax OECD countries. Even the matter of opening up the accounts at the banks for the OECD to see, has problems with OECD countries drawing customers to their banking privacy practices. Which is very important with Luxembourg’s powerful banking institutions. And while Switzerland has made a deal with the OECD to collect tax on accounts held by OECD residents, it has held firm that Switzerland’s banking privacy is non-negotiable. This means that the OECD gets the tax, but not the taxpayer.

The OECD says, there are three criteria of harmful tax practices:

(1) no exchange of information,

(2) no transparency, and

(3) no active business activities on the local level. In other words, a company establishes itself with no activity other than the enjoyment of lower taxes.

Two decades ago the British government encouraged its numerous small former colonies to set up financial centers with offshore banking in order to build economies to make them self-sufficient, to foster high-caliber employment and now, under the pressure of OECD nations, it wants to undo that. The meetings with these small nations and the OECD have led to ugly verbal abuse. There was a meeting in Barbados when the OECD sponsors and the Commonwealth Secretary engaged in a "slanging match" and accused the OECD of "dictatorial behavior." Later the Commonwealth countries argued that the threatened sanctions was "high-handed and undemocratic." All the while, the OECD proclaimed that if the havens have transparency, non-discriminatory taxes, and the commitment to exchange information with other countries, this does not undermine the offshore financial centers’ ability to compete. However, no one believes that.

The leaders of the Caribbean Community and Common Market (CARICOM) consider the blacklisting of its tax havens as "ill advised…and should not be ordered by external agencies or countries." The attack on Caribbean countries has "created a hostile environment." Blacklisted countries also feel of having been unfairly targeted, as other major countries, including the U.S., also avoid taxes. Some years ago at hearings before the House Ways and Means Committee, Charles Rangel, the ranking Democrat on the Committee asked "The United States is a tax haven, isn’t it?" It is, in many ways. What would happen is the OECD blacklisted the U.S.?

It was the same story in the Pacific, with the small countries bucking the OECD demands. For example, the Pacific island of Vanuatu expressed its defiance and it informed the OECD it would not go along with its demands. Its finance minister stated the OECD measures were equivalent to blackmail and reflected the "neo-colonial attitude" of countries like Britain, France and Germany. However, the government of Vanuatu gave up and in May 2003 acceded to OECD demands. Currently, 31 countries that were threatened to be blacklisted by the OECD have signed up. One wonders why they caved in without a fight. Is it possible that the OECD has bitten off more than it can chew? Does it have the personnel available to audit and keep tabs on so many countries?

As recently as July of this year, back on the continent of Europe, the OECD Europeans were to crack down on its own local tax havens, such as the island of Jersey, in which a close to a quarter of its 87,000 workers are employed in the offshore banking community. This has produced the flight of funds to Singapore, Hong Kong, and even Dubai in the United Arab Emirates. As a result a European journalist said the tax havens in Europe are in "disarray." One professor explained it this way, "Regulating the tax havens is one of the world’s great chess games. Each time you move a piece, the other side has already moved.”

The OECD’s move against Europe’s tax havens was to become effective the first week of July 2005. But Gibraltar refused to go along, prompting a leader in Guernsey’s financial community Peter Symes, to remark, "At this moment, Gibraltar has not signed up, so we have not got the level playing field we were promised. It could all be revoked further down the line." With the flight of capital and money to Hong Kong and Singapore, Symes said this was the most awful day of his life.

Meanwhile the U.S. has had its own game plan in dealing with offshore tax havens and there is little inclination on the U.S. government and Congress to join up with the OECD’s plans, especially with the OECD blasting the U.S. for its tax policy on foreigners with low tax and no tax. The U.S. feels it has no business, nor does any nation have any business in telling another country what kind of taxes it should have, and this has prompted some of the OECD’s angered response to the position of the U.S.

Finally, the U.S. has an aversion to any international agency that exercises policy on its people or affairs. The 29 members of the OECD making tax policy will not be allowed to make tax policy for the U.S., and the OECD should be aware of that. The OECD may be able to push around small countries such as the Cayman Islands, but as for the U.S. the OECD has decided to leave the sleeping giant alone, because its banks and government control the world’s reserve currency, and it will not like being told what kind of taxes it should adopt, or force on another country. The U.S. wants to have its taxpayers report all their taxable income from everywhere and, if that is done, nothing else is required. And the key is not to act as a big bully with a form of intimidation unknown in history, but in developing tax treaties to deal with the problem, which the U.S. seems to have done very well. For example, the Bahamas has a new treaty with the U.S. to provide tax information, therefore it has not been necessary to revoke the Bahamas from the U.S. banking system. Tax treaties are a well-known way of dealing among nations. In the long run, the OECD’s big bully-system is most likely doomed to failure. Enterprising bankers, lawyers, and accountants will see to that.

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