As anyone who has ever dealt with the Internal Revenue Service (IRS) can attest, the agency holds all the cards and can confiscate assets on a whim. Fortunately, the U.S. has a robust legal system that allows American citizens to confide in their lawyers about the ins-and-outs of their bank accounts and tax preparation strategies.
But this may soon change, as the (US taxpayer-funded) Organisation for Economic Co-operation and Development (OECD) implements policies that will trample on attorney-client privilege and make sensitive financial information available to bureaucrats across the government. The Trump administration can put a swift end to this outrage, by tethering the tens of millions of dollars’ worth of annual aid to sensible reporting requirements. For the sake of taxpayers and citizens everywhere, the U.S. must act to protect the hard-won privacy of its citizens.
Attorney-client privilege is a cornerstone of Western law and has repeatedly been affirmed by the Supreme Court and other national judiciaries across the developed world. In 1888, the Supreme Court ruled that this privilege was “founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from consequences or the apprehension of disclosure.”
Evidently, the OECD does not agree. Under the Common Reporting Standard (CRS), first approved by the OECD in 2014, consenting jurisdictions are required to collect and exchange information from financial institutions ostensibly to combat tax evasion. Information such as capital gains, account balances, and basic data about account holders is fair game to be reported to jurisdictions around the globe. But the other shoe dropped in December 2017, when the OECD issued rules requiring lawyers and advisors to disclose any and all attempts by bank account holders to circumvent these CRS reporting requirements.
But moves to get around the CRS framework needn’t be the result of a sophisticated, sinister financial plot. Large economies such as the U.S. aren’t party to the CRS to begin with, meaning that any attempt by investors to deposit their monies in America could qualify as an “avoidance arrangement” under the OECD framework. That’s right: lawyers could be put in the OECD’s crosshairs just for receiving sensitive information about a client’s desire to invest in the U.S. And U.S. taxpayers are paying for this charade.
Normally, when a national or international regulatory agency makes a ridiculous rule, stakeholders have a reasonable timeframe to submit comments and air their grievances. Apparently, the OECD is above adhering to sensible rulemaking practices. The organization opened their comment period on December 11, 2017 and closed their consultation period on January 15, 2018. For industry professionals taking off time in late-December to be with their families for Christmas, Hanukkah, and Kwanza, this timeframe afforded little to no time to consider weighty regulations with far-reaching consequences.
Nevertheless, organizations stepped up to the plate and offered sensible critiques of the OECD’s regulatory bombshell. The Chartered Institute of Taxation reasonably opined, “Not all secrecy is designed to allow tax evasion. But we accept that some secrecy is motivated by tax and that there is a need for transparency to tax authorities. However, a balance needs to be struck between taxpayers’ right to secrecy for legitimate reasons (e.g. fear of crime) and tax authorities’ right to information; neither can be total.”
Despite these comments, and other sensible remarks by concerned groups, the OECD remains fully committed to running roughshod over attorney-client privilege and maintaining extensive financial reporting requirements. But the U.S., which funds about a fifth of the OECD’s budget, has it within their power to oppose the organization’s power grab and decriminalize foreign investments in America. The clock is ticking, and billions of dollars in investments are on the line. America cannot and should not allow unaccountable global bureaucracies to steal our freedoms on our dime.
Catalyst articles by Ross Marchand