- The Washington Times - Thursday, May 30, 2002

With the ongoing war on terror, the value of an international network of financial information-sharing is gaining currency. Following the money trail is a critical method of identifying terrorists, but the White House must make sure that the privacy of U.S. citizens does not suffer in the process.

The United Nations has recommended the creation of an International Tax Organization, which would require all U.N. members to share the financial information of their citizens. Even if the intentions are good a possibility that cannot be entirely discounted it is an idea that should raise huge red flags.

Unfortunately, it could also make U.S. citizens the targets of mischief-makers, since many foreign governments don't have the same standards of protecting financial privacy. In fact, the potential doomsday predictions under such a scheme are too numerous to list, but just imagine an international black market for people's financial information. Certainly, there would be no shortage of interested buyers.

A proposal floated by the Organization for Economic Cooperation and Development (OECD) working group that targets "unfair tax competition" is similarly misguided. While the proposal envisions a system of information sharing that could be useful to America's anti-terror efforts, it also seeks to force all member countries to enact similar tax laws. Such an initiative would have a devastating impact on international tax competition.

Fortunately, the Bush administration has taken a dim view of this aspect of the OECD's proposal. As Treasury Secretary Paul O'Neill has said, "The United States does not support efforts to dictate to any country what its own tax rates or tax system should be, and will not participate in any initiative to harmonize world tax systems." This is the right note to strike.

Richard Rahn, a member of the Task Force on Information Exchange and Financial Privacy, has concerns about the U.S. Patriot Act and its impact on financial privacy. The law will require any business that deals with large amounts of cash to file reports when it receives certain amounts (with the thresholds varying for many businesses) and when it detects "suspicious" activities. "This thing is going to be a total mess," said Mr. Rahn, since the government won't be able to handle the enormous volume of these reports. "Of course it was labeled the Patriot Act so no one could vote against it," he added.

The White House must strike a careful balance between its efforts to surveil the financial activities of potential terrorists and respect for the financial privacy of U.S. citizens. Financial privacy shouldn't become a casualty of war.


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