The OECD is driven by the USA and several other countries towards a common tax structure and, even, common minimum rates of tax. The OECD's weaponised arm, the Financial Action Task Force is used to push independent nations to adopt the OECD's position with a range of sanctions and more. The USA itself, through its FATCA regime requires other countries to put in place measures to report income by American citizens. What if someone in the USA asked "what if..."? Well, now they have.

The message sold to the public when the Financial Action Task Force was created was that it was all about taking the profit out of drugs trafficking. At that it's been a signal failure.

But that was never the real objective: the real objective was to act against tax evasion and even tax avoidance. And by tax, it meant income, corporation and wealth (including death) tax.

These tax regimes are enormously complicated . The USA's Income Tax Code alone is more than 1,500 sections most with many sub-sections.

The assessment of such taxes is a monumental task. The Inland Revenue Service, known as the IRS, has almost 100,000 people - but that's just the tip of the tax official iceberg. In tax year 21-21, the Government Audit office reports, the IRS spent USD7,000 million on technology - and the GAO says it's not enough and that "archaic" technology is hampering the IRS in its efforts.

The USA's multi-layered tax system creates huge inequities. For example, there is a national income tax system and various other taxes, duties and levies are set centrally. But the states are responsible for their own budgets and for raising their own taxes. So there's another layer of tax compliance and another layer of tax offices that all have to be paid for while not actually contributing anything to the things that matter like healthcare, roads, the development of railways and effective last-mile transit systems. Why does this create inequities? It's because some states, for example Florida, have zero income tax but charge a sales tax on everything. True, it's an absolute nuisance because no one ever posts the price including tax so what's on the sticker is not what you pay but there's an easy fix,

The current system is popular amongst some but not all.

The EU, the OECD, the FATF and the USA in particular, along with a host of pressure groups, such as OXFAM, that are sponsored by members of the OECD's G7 and EU have often taken aim at so-called tax havens. But they are not tax havens at all: they merely have a different tax system which is incompatible with that demanded by the OECD, et al. Their systems are a combination of some of the following : to charge companies a flat rate for having their legal base there, to charge income tax at a flat rate (above a set limit), to apply duties on all imports, to charge sales tax.

The entire global tax initiative depends on all countries taxing income. So, incidentally, does much of the international cooperation relating to money laundering because that's what the system was primarily designed to deal with.

So here's the nuclear option that could blow up the entire system: The Fair Tax Bill (they are American so they call it an Act but it isn't) is a highly partisan piece of legislation. Tax reform comes up every so often but rarely under a Democrat president. Why? Because the left like income and corporation tax: it's a tool that can be used for social manipulation and wealth redistribution, so it's a basic plank of all socialist regimes.

The Bill is radical, even by the standards of radical US draft laws. Its headline is to abolish the IRS with all its buildings and technology and huge staff. All Federal taxes as they are currently defined would go. The plan is to replace them all with a flat rate consumption tax of 30% nationwide.

Some flaws

Administratively, it's not a dumb idea but it is naive to imagine that there will be no evasion. So if it's to work properly, what is really needed is a value added tax but one which is far, far simpler than that as defined by the European Union which ha spawned an entire industry of advisers and a regime that only specialists can understand. It should not be like that. Actually, there's a suggestion that the system operate like VAT in that tax would be added at each transaction but unlike VAT the seller's tax would be calculated on the price he paid including tax not, as with VAT, the seller's tax being calculated on the price he paid excluding tax. So any tax rate the Bill's advocates propose is disingenuous, as it is presently drafted.

And some of those 100,000 workers will be needed but the Federal government won't pay for them : the Bill requires tax collection by the states on behalf of the government. Is this a burden the States will accept? Do they have a choice?

President Biden has said that if the Bill passes both Houses and arrives on his desk, he will veto it.

The serried ranks of broad-left pressure groups are flooding sympathetic media with scare stories. They are not all wrong.

Flat taxes have long been suggested but the total abolition of income and wealth taxes, not so much, at least in the USA.

Will it pass? It's very unlikely although House Speaker Kevin McCarthy (R-Calif.) (remember him and the difficulty there was in getting him approved?) says he will bring it to the House for a vote. But that's not supported by an actual plan, it seems.

It's expected to reach a vote in Congress shortly.

There is one final point: there is a sunset provision. The IRS will receive no funding after 2027. So it won't be mothballed, it will be gone.

The summary of the Bill on the Congress website says "the bill terminates the national sales tax if the Sixteenth Amendment to the Constitution (authorising an income tax) is not repealed within seven years after the enactment of this bill." Amendments to the Constitution take time: in some cases decades. Watching what happens if time runs out and someone says "let's have income tax" will be even more bemusing than watching the annual budget hearings with their threatened "government shutdowns."

The name of the Bill, The Fair Tax Bill, is amusing because of the mantra that everyone should "pay their fair share" when that actually means to apply discriminatory tax bands or, even tariffs.

So, that's the American position.

Will the USA become a tax haven?

What will the OECD, the EU and the FATF do? Will the USA be grey-listed?

What will all those countries that have been so bullied over the past two decades do? Will they feel vindicated and restore the system they wanted all along?

Where will such a change leave the OECD's tax harmonisation scheme for companies at a minium of 15%? Will Ireland say "well, look at that. We'll go back to our preferred rate of 10%."

Will the US develop an offshore industry that extends beyond e.g. Delaware? I've not found a provision that specifically abolishes the USA's extraordinarily vicious (30% with no allowances for expenses) withholding tax. If that goes, then the USA will, indeed, become a tax haven of the style that has long been under attack.

If the USA does pass and implement the Bill, the ramifications are enormous and reach far outside the USA,

For those who argue against such homogenisation and in favour of tax sovereignty, it will be a moment so savour.

The Bill, HR25, was introduced into the House of Representatives on 9th January and you can read it here: https://www.congress.gov/bill/118th-congress/house-bill/25/text

It has been referred to the Ways and Means Committee but no date for a hearing has yet been set.

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