The Stop Tax Haven Abuse Bill

On 17 February 2007, American Senator Carl Levin introduced a Bill titled the 'Stop Tax Haven Abuse Act'. It contains provisions aimed at combating what Levin described as the $100 billion per year drain on the treasury from offshore tax abuse. It has not yet been enacted, however the recent report by the Senate Committee on Homeland Security and Governmental affairs, chaired by Levin, contained a renewed call for the it to be passed by Congress. Indeed, when Levin introduced it he did so with the stated support of two other senators; Coleman and (current presidential candidate) Obama who on 22nd September in a speech in Wisconsin said "we lose $100Bn every year because corporations get to set up mailboxes offshore so that they can avoid paying a dime of taxes in America. Imagine if you got to do that......I will shut down those offshore tax havens and corporate loopholes as President, because you shouldn't have to pay higher taxes because some big corporation cut corners to avoid paying theirs" If Obama makes it to the White House in November the Bill will have very high-level support indeed. That factor, combined with Levin's record of campaigning against offshore jurisdictions, suggests it is more than a mere possibility that the Bill will, whether in its present form or with amendments, be enshrined in law.

The Bill is not only bullish in its aim, which is to prevent tax evasion, but also its prime target; "offshore secrecy jurisdictions". As well as providing a statutory framework to determine what an 'offshore secrecy jurisdiction' is, it includes a list of 34 countries which will, upon enactment, be automatically considered such. Amongst those receiving the automatic tag, i.e. without any specific determination by the Secretary for the Treasury, are Jersey, Guernsey, Sark, Alderney and the Isle of Man.

An offshore secrecy jurisdiction is one, which, in the judgment of the Secretary, has 'corporate, business, bank, or tax secrecy rules and practices which... unreasonably restrict the ability of the United States to obtain information relevant to enforcement'. Where it is judged that a jurisdiction falling into that description has an effective information exchange practice with the United States, it can escape inclusion. The Bill provides for annual assessments as to whether countries do fall within the definition.

The 'rules and practices' referred to are those that inhibit access of law enforcement and tax administration authorities...