Herding Cats and Taming Tax Havens: The US Strategy of ‘Not In My Backyard’
| Published date | 01 September 2014 |
| Date | 01 September 2014 |
| DOI | http://doi.org/10.1111/1758-5899.12135 |
| Author | Ronen Palan,Duncan Wigan |
Herding Cats and Taming Tax Havens: The
US Strategy of ‘Not In My Backyard’
Ronen Palan
City University London
Duncan Wigan
Copenhagen Business School
Abstract
Recent G8 and G20 statements, combined with a number of OECD campaigns have given an impression that the world
has entered a phase of re-invigorated multilateral efforts to combat tax abuse. We argue that this impression is not
entirely mistaken, but the centre of gravity in the battle against tax abuse generally, and tax havens specifically, is shift-
ing decidedly towards unilateral approaches. The US is, in particular, in flexing its muscles attempting to ensure that
the various mechanisms used to evade taxation and perpetrated through tax havens have little impact on its ‘back
yard’. We call this the ‘Not In My Back Yard’(NIMBY) principle of regulation, which underpins the new Foreign Account
Tax Compliance Act (FATCA). The NIMBY principle, we argue, is likely to be adopted by other large political entities.
Policy Implications
•The re-focusing of anti-tax abuse measures from states to private financial intermediaries is proving effective. In
addition, states should focus their efforts on offshore professional service providers.
•Considering that business competitively emulates tax abuse practices, the OECD and G8 should encourage the
competitive emulation of antiabuse measures.
•The OECD should be used to integrate successful unilateral fiscal measures via technical support rather than
develop multilateral antiabuse policies that are inevitably based on the lowest common denominator.
•When multilateralism has proved weak, ad hoc unilateral measures will catalyze widespread change and increase
the transaction costs of tax abuse.
Introduction
In the wake of the global financial crisis a G20 communi-
qu
e announced the intention ‘to take action against non
cooperative jurisdictions, including tax havens’(G20,
2009, p. 4).
1
The 2013 Lough Erne G8 Leaders’commun-
iqu
e stated: ‘We call on the OECD to develop a common
template for country by country reporting to tax authori-
ties by major multinational enterprises taking account of
concerns regarding non cooperative jurisdictions... and
commit to developing a single truly global model for
multilateral and bilateral automatic information
exchange’(G8, 2013, p. 6). These two declarations repre-
sent a sea change in the long, meandering and often
frustrating series of battles against tax abuse perpetrated
through tax havens. Known and widely discussed already
in the early 20th century (Chavagneux, 2001; Farquet,
2009; Likhovski, 2004; Picciotto, 1992) serious multilateral
efforts to combat international tax and secrecy abuses
began in earnest only in the late 1990s (Genschel & Sch-
wartz, 2011; Palan, Murphy and Chavagneux, 2010; Rixen
2008; Sharman, 2006). With the publication of the 1998
OECD report, Harmful Tax Competition: An Emerging Glo-
bal Issue (OECD, 1998) a new era in of multilateral efforts
to combat tax avoidance and evasion began.
2
Over a
decade later, the 2013 G8 statement served as a vivid
demonstration that a genuine consensus for the need for
intensive multilateral efforts to tackle tax abuse had
emerged.
The argument we put forward in this article is that
while the impression of re-invigorated multilateral efforts
to combat evasion and avoidance is not entirely mis-
taken, the centre of gravity in the battle against tax
abuse generally, and tax havens specifically, is shifting
decidedly towards unilateral approaches of a very spe-
cific type.
3
The US Obama administration and the EU
©2014 University of Durham and John Wiley & Sons, Ltd. Global Policy (2014) 5:3 doi: 10.1111/1758-5899.12135
Global Policy Volume 5 . Issue 3 . September 2014
334
Research Article
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