In this new era of automatic information exchange between tax authorities, the United States has come to be seen as the driving force behind the end of tax secrecy. (Although I note that back in 2010 Tax Justice Network said that the US’ FATCA initiative “preserves the essential Tax Haven USA approach – preventing the US
having to provide information to foreign governments about their own fatcats using the USA as a secrecy jurisdiction. What it does is to beef up the ability of the U.S. to find out about its own tax cheats.”)
I’ve been looking through the US embassy cables made public by Wikileaks, and one of the most interesting tax stories relates to the US and Argentina.
In March 2007, Argentina made a request for a tax information exchange agreement (TIEA) with the US. A cable explains how the US responded by offering a full tax treaty, not a TIEA:
Following AFIP’s March 2007 TIEA information request, EconCouns contacted U.S. Treasury Tax Treaty officer Henri Louise [sic] who provided background on USG BITT protocols and models as well as on the USG’s 2007 negotiation of a TIEA with Brazil. At the request of AFIP Tax Director Castagnola, EconCouns then presented copies of the 1998 U.S./Venezuela BITT and the 2006 model tax treaty. Also at AFIP’s request, EconCouns met on this issue with the Ministry of Economy’s Undersecretary for Public Revenue Mario Presa, whose office develops broad GoA tax policy guidelines. On August 27, the GoA’s Ministry of Economy Washington rep Jorge Heilpern and Washington Embassy DCM Jose Gabolindo met with Treasury Tax Treaty officers Kissel and Louise for exploratory discussions on the potential to negotiate a Bilateral Income Tax Treaty (BITT).
This is akin to saying “you can have tax information exchange, so long as you surrender some of your taxing rights through a double tax treaty.” Argentina clearly didn’t want to do so, and later that year the cables record two discussions between the head of Argentina’s tax and customs authority, Alberto Abad, and the US Ambassador to Argentina. The second discussion, in November, is recorded as follows:
Abad recalled that the U.S. Treasury Department continues to condition a formal US/GoA Tax Information Exchange Agreement (TIEA) on negotiation of a broader Bilateral Income Tax Treaty, notwithstanding the fact that the U.S. in 2007 signed a TIEA with Argentina’s Mercosur partner Brazil based only on the promise of future tax treaty negotiations… AFIP sees the U.S. IRS as a model to be emulated and seeks a closer working relationship. The only solution to the globalization of tax evasion, money laundering and terror finance, Abad concluded, is increased exchange of information by tax and revenue authorities. “Give us a signal,” he concluded. “We don’t need to negotiate a big bilateral agreement, but we want to develop a new, closer relationship with you.”