Critics Slam Proposed U.N. Tax Authority

Published January 18, 2002

| FoxNews.com

The United Nations is gearing up for what could be yet another explosively controversial international conference, this time over charges the organization wants to create a powerful worldwide tax bureaucracy.

Supporters see the International Conference on Financing for Development, set for Monterrey, Mexico, from March 18-22, as a chance for world governments to address a wide range of financial issues related to global development.

But critics of the U.N. see a far more disturbing agenda in the works.

"This is scary. They're talking about establishing an extra layer of government at the world level," said Veronique de Rugy, an analyst at the Washington-based Cato Institute. "Their goal is an international tax cartel … that would work to keep taxes high."

The controversy centers in part around a proposal to create something called the International Tax Organization. The organization would help nations collect and disseminate information on tax policies and, opponents insist, assess its own taxes, help governments tax emigrant citizens working in other countries and even compel member states to share tax data.

U.N. officials and their supporters said that's overstating the case.

"This has nothing to do with taxing anybody. That is specifically what this proposal is not about," said Tim Hall, a U.N. spokesman. Hall said the most recent draft text for Monterrey calls for "strengthened international tax cooperation through enhanced dialogue," and does not call for the establishment of an international tax organization.

But there's no language guaranteeing just exactly what's going to be inserted into the Monterrey document during a preparatory conference in New York next week. Much of the meeting's agenda has yet to be revised and approved.

The debate threatens to disrupt if not entirely derail the Monterrey discussions, something U.N. officials are anxious to prevent. The organization is still recovering from the embarrassing collapse of its anti-racism conference in South Africa last fall, the latest in a series of controversial international gatherings that have taken place in recent years.

Some predict a messy affair if the tax organization issues aren't fully addressed in the coming weeks.

"What you're going to see in Monterrey will make Durban [anti-racism conference] seem like a party," said one U.N. observer who asked not to be named. "This has the potential to be much more embarrassing when people find out the full scope of what they're really planning."

Critics are particularly worried the United States, which could normally be counted on to quickly and loudly reject any thoughts of a world taxing authority, might be more open to sign on to a deal in the post-Sept. 11 political climate.

"Because of what happened on Sept. 11, the U.S. may be more willing to buy into some sort of information exchange," added de Rugy. "Usually the U.S. is in favor of financial privacy … but now it is seen as something that protects terrorists."

Critics should also resist the temptation "to dismiss this kind of report as just another U.N. fantasy," others said.

"This is a problem because it meshes completely with what the EU and OECD [Organization for European Cooperation and Development] has been trying to do for some time," said Dan Mitchell, of the Heritage Foundation think tank in Washington.

High-tax countries like France have long lamented their loss of human and financial resources to lower-taxed nations like the United States. An international tax agency would thus work to reduce such "tax competition" between nations.

"There is a concern that through better cooperation, you would avoid a race to the bottom" of tax competition, said Hall. "It could be a much more fair way of doing taxes, and actually help avoid double taxation for some."

That doesn't sound right to low-tax advocates. They fear decreased "tax competition" would only force foreign nationals working in the United States to pay higher taxes to their native governments or, even more disturbing, compel the United States to raise its own tax rates.

"What the U.N. is trying to do is act on behalf of high-tax nations who refuse to face the facts of the global economy," de Rugy argued. "They want to force low-tax countries to increase their taxes."

There is also the question of how much money the United States would gain or lose as a result of greater international tax cooperation.

Some argue an international tax organization — in whatever form it takes — could help the U.S. Treasury collect hundreds of millions in dollars from American tax cheats who have taken refuge overseas. Others believe America would lose billions if anxious overseas investors pull their money out of U.S. businesses in attempt to avoid any international tax regulations.

U.N. advocates like Hall say all this uncertainty proves meetings like Monterrey are necessary.

"There's no question there are lots of ideas floating around with these countries," he said. "But you have to remember it's the individual governments that run the show. No one can make them do something they don't want to do."

Skeptics, meanwhile, just hope the United States and other like-minded nations aren't going to be dealt cards from a stacked deck.

"A lot of the work at these things is done well in advance, and I'm not sure there will be any adult supervision here," said Mitchell. "It's up to the U.S. government to protect it's own interests, and not let a bad idea snowball into something much, much bigger."

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