Ethics and governance in the European Financial centers

The United States should encourage its G20 partners to sanction offshore banks and jurisdictions that fail to cooperate with international tax enforcements efforts, Sen. Carl Levin (D-Mich.) said yesterday in a letter to President Obama urging U.S. leadership on tax haven issues at the G-20 summit in Pittsburgh next week.

In his letter, Levin, chairman of the U.S. Senate Permanent Subcommittee on Investigations, calls for the G20 nations to bar tax haven banks from participating in the global financial system if they refuse to cooperate with law enforcement investigations of tax evasion

In his letter, Levin encourages the President to push the G20 nations to adopt an approach on tax havens similar to successful methods currently in use in the United States to target international money laundering. With those methods, U.S. financial institutions can be barred from doing business with nations or financial institutions engaged in money laundering. A provision allowing the same measures to be applied to nations or financial institutions that impede U.S. tax enforcement is included in the Stop Tax Haven Abuse Act, which Levin introduced this year and which Congressman Lloyd Doggett has introduced in the House. President Obama has endorsed that bill and cosponsored similar legislation in the last Congress when a member of the Senate.

“If the legal mechanisms were in place, and a tax haven bank refused to cooperate with a tax investigation, the United States, acting on its own, could stop that tax haven from taking advantage of the U.S. financial system,” said Levin. “If other countries adopted the same legal mechanisms, our G-20 partners or a subset like the G-7 could act as a group to lock the offending bank out of the global financial system. Tax haven banks facing that type of united action would have a much harder time turning law enforcement away empty handed.”

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