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WASHINGTON (AP) – The Bush administration will aggressively pursue those who use offshore havens to escape U.S. taxes, but will not support international efforts to dictate how these countries structure their tax systems, Treasury Secretary Paul O’Neill told Congress on Wednesday.

“We ought to pursue every tax cheat to the ends of the earth,” O’Neill told the Senate Permanent Subcommittee on Investigations. “We may not like what other countries do, but we don’t have the right to tell them what their tax system ought to be.”

O’Neill was summoned by Senate Democrats to explain the administration’s decision to urge changes in the approach taken toward tax havens by the 30-nation Organization for Economic Cooperation and Development. The United States loses at least $70 billion in tax revenue a year due to assets hidden offshore.

Previous administrations had strongly supported the project by the Paris-based OECD to curb use of offshore subsidiaries, bank accounts and other arrangements to evade taxes. But O’Neill and congressional Republicans have portrayed the project partly as an attempt to punish countries with low taxes, even as Bush was pushing for his huge U.S. tax cut.

Instead of lists and threats of sanctions against such countries as Nauru, the Bahamas and Panama, O’Neill pledged that the United States would seek to negotiate treaties allowing for easier pursuit of suspected tax evaders in those countries and is working with the OECD to focus tax haven efforts on exchange of information for those prosecutions.

O’Neill promised that within a year the Treasury Department would negotiate such tax treaties with half of the 35 countries identified as tax havens by the OECD.

“We are dedicated, and determined, to do a better job than has ever been done,” O’Neill said.

The panel’s chairman, Democratic Sen. Carl Levin of Michigan, said he was dubious about the secretary’s promise, noting that only the threat of OECD exposure and international sanctions led countries such as the Cayman Islands to agree to greater information exchange in such areas as tax evasion and money laundering in offshore banks. Nine other countries made similar commitments.

“The only thing that worked is when the international community took action,” Levin said.

Levin produced IRS data showing that some suspected tax havens such as Antigua and Barbuda, were home to only 87 U.S. taxpayers identified by the Internal Revenue Service in 2000 – but there were some 12,000 offshore companies. Although it is impossible to know how many of those were American, Levin said many must be.

“These figures, it seems to me, demonstrate dramatically … that tax evasion is rampant,” Levin said.

O’Neill, however, dismissed the data as essentially meaningless, at one point saying that the banking system in Switzerland is also “mysterious” and could fall under the same sorts of sanctions the OECD had been pushing for smaller, less developed countries.


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