Earlier this month, President Obama released his plan for cracking down on corporations that use overseas tax havens, a practice that costs the U.S. billions in lost tax revenue every year. “Within minutes” of Obama’s announcement, Finance Committee Chairman Max Baucus (D-MT) was putting on the brakes by calling for “further study” of Obama’s proposals.
Baucus continued his waffling on tax havens today, rebutting a push by Rep. Lloyd Doggett (D-TX) and Sen. Carl Levin (D-MI) to hold off on a free trade agreement with Panama until the Panamanian government makes more of an effort to stop tax avoidance within its borders. At the moment, “Panama is one of only 13 countries – and the only current or prospective FTA partner – that is listed on all of the major tax-haven watchdog lists.”
“In this time of economic distress, we can no longer afford to ignore the billions of dollars of tax revenue lost to the U.S. Treasury due to the bank secrecy practices of Panama and other tax havens,” wrote Doggett and Levin. Baucus countered with this:
Noting calls by some Democrats for the White House to address worries about Panama’s banking secrecy before sending the [free trade agreement] to Congress, Baucus said he is concerned about the issue, too — but not enough to delay action. “I want to see progress on tax issues in Panama,” Baucus said at a hearing on the pact, “but we can and should move ahead on a trade agreement right now.”
Baucus seems to be perfectly content with punting the tax issue further and further down the road. But as Sen. John Kerry (D-MA) wrote today in Politico, the free trade agreement presents a great opportunity for pressing Panama to address tax havens:
Just as with every similar country, we need to protect against efforts by U.S. citizens to evade taxes and to stop terrorist organizations, drug cartels and other criminal groups from exploiting bank secrecy havens. In Panama’s case, we have an opportunity to use the prospect of opening our vast markets as leverage to win the long-sought commitment from the Panamanian government to sign and implement a tax information exchange agreement with the United States and to bring its banking laws into compliance with international standards.
The non-profit group Public Citizen found that the proposed free trade agreement with Panama “would remove key policy tools” for fighting tax avoidance and “would also conflict with U.S. government efforts to combat the global economic crisis by re-regulating finance.” It’s all well and good that Baucus keeps acknowledging that tax havens are a problem, but his actions make it seem like he’s hoping the havens will simply disappear on their own.