A bill that would create a list of foreign tax havens, and give the U.S. Treasury Department new tools to impose sanctions on them, has set off an intensive lobbying push by locales that don’t want to be named in the legislation.

To battle the Stop Tax Haven Abuse Act, Malta, the Isle of Man, the Cayman Islands Financial Services Association and others have spent more than $800,000 on lobbyists at firms including Covington & Burling; Son­nenschein Nath & Rosenthal; White & Case; and Quinn Gillespie & Associates.

The list of 34 foreign jurisdictions in the legislation was gleaned from court cases filed by the Internal Revenue Service that identified them as probable locations for U.S. tax evasion, according to a summary of the bill introduced in March by Sen. Carl Levin (D-Mich.). The bill won praise from Treasury Secretary Timothy Geithner and others in the Obama administration. It also represents potential revenue at a time when Congress needs money to pay for complex new initiatives, such as health care reform and climate change.

The bill has brought out lobbyists for places that aren’t always thought of as major players in Washington, such as the Isle of Man, a 32.5-mile island in the Irish Sea that is home to fewer than 80,000 people. Arguing that such a blacklist would damage the reputation of the locations with those who might do business there, lobbyists are saying their clients’ names should be left out of it.

“People are then less likely to engage in [transactions] because we have a reputation of being a bad actor,” said Linda Car­lisle, a partner in White & Case’s Washing­ton office, who represents British islands Jersey, Guernsey and the Isle of Man.

Rep. Lloyd Doggett (D-Texas), the sponsor of the Stop Tax Haven Abuse Act in the House, says that’s the point. “The best way to put pressure on these recalcitrant countries to end their shady practices is to shine a light on their identities,” Doggett said in an e-mail through his spokeswoman.

The lobbyists have said Levin’s list is out of date because their clients have negotiated, or are negotiating, agreements with the United States that require cooperation and transparency on tax issues. And many of these lobbyists and their clients are pushing for alternative tax haven legislation — drafted, but not yet introduced — that doesn’t name names.

According to White & Case’s disclosure filing under the Foreign Agents Registration Act, the firm arranged a series of meetings with congressional staffers during a visit by three government officials from the States of Jersey on March 24 and 25. The delegation also met with officials at the IRS and the Multistate Tax Commission, a group that creates draft legislation for states.

“What we have been suggesting is that any list may very well be outdated as soon as it’s written down,” Carlisle said. If a list is included, Carlisle said the government should draw information from an April report by the international Organisation for Economic Co-operation and Develop­ment, which named all three of Carlisle’s clients as having “substantially complied” with the international tax standard.


Levin has long said offshore tax havens play a major role in tax evasion, and better enforcement is needed. He had filed an earlier version of the Stop Tax Haven Abuse Act in 2007 that was backed by then-Sen. Barack Obama, but it didn’t pass. Last year, Levin, who chairs the Sen­ate Permanent Subcommittee on Investi­gations, held hearings that found foreign banks, such as UBS A.G. of Switzerland and LGT Group of Liechtenstein, helped wealthy Americans evade the IRS. The hearings fueled investigations, calls for a crackdown on offshore tax havens, and stricter enforcement against American citizens and corporations that move money abroad. Presi­dent Obama has also pledged to target tax scofflaws who hide money in foreign countries.

Since the hearings, several countries have moved to negotiate agreements calling for more transparency and reporting, both with the United States and other countries. Ronald Platt, a senior managing director of Sonnenschein’s public law and policy strategies group, said Malta has agreed to a tax treaty with the United States that still must be ratified by the Senate Foreign Relations Committee. Malta has “given up any discretion,” said Platt. “The U.S. asks for something, they give it, no questions asked.”

Sonnenschein’s lobbying contract with Malta, filed publicly with the Department of Justice under the Foreign Agents Regis­tra­tion Act, notes that the firm will represent Malta on ratification of the treaty, among other things, in exchange for $25,000 a month. Malta “immediately” expressed concern that the country’s inclusion on Levin’s list could stall consideration of the treaty.

Platt, Carlisle and others said they prefer a draft alternative to Levin’s bill pushed by Sen. Max Baucus (D-Mont.), who chairs the Senate Finance Committee where Levin’s bill currently sits. Like Levin’s bill, Baucus’ draft requires more reporting by entities transferring money offshore. Levin’s bill puts more of a burden on taxpayers, who would have to prove that their financial arrangements are in order. The draft legislation is still under review, but it doesn’t include a list of countries.

Tony Travers, chairman of the Cayman Islands Financial Services Association, which hired Washington’s Quinn Gillespie & Associates in March, said that he favors the Baucus legislation for several reasons, including the way it requires transfers to offshore accounts be immediately reported to the IRS. He criticized the Levin bill for presuming, under some circumstances, that money transferred to offshore accounts is subject to American tax jurisdiction.

Travers said he has come to the United States twice in the past six weeks for meetings with congressional staff members, and the tax haven bill is a priority for the association. As for the list in the Levin bill, he said it “is based on information that is no longer relevant or up to date,” but added he believes it’s a “diminishing issue” because he’s been told by Quinn Gillespie that it’s not gaining traction.

A spokesman for Levin confirmed only that Levin’s staff has been talking with Senate Finance staff.

Platt, too, said he’s assured his clients that Baucus’ version is the one more likely to pass, possibly as part of the effort to pay for health care reform. Just in case, he said, “we met with Baucus’ staff,” including the chief tax counsel and other Finance Committee staff, “and briefed them on other relations that exist between the U.S. and Malta.” Platt said he also met with Levin’s staff and asked that Malta be removed from the list, but was told that Treasury would have the discretion to do so if the bill becomes law.


Countries are working on other tax haven issues, too, hoping to smooth over a testy area of international relations.

Stuart Eizenstat, a partner at Wash­ing­ton’s Covington & Burling, registered to represent Liechtenstein “in connection with the Government’s response to recent developments related to tax havens and bank secrecy issues” in June 2008, before the Levin-led hearings on tax evasion. Covington’s most recent disclosure report, which covers the period ending March 30, showed meetings at the departments of State and Justice on behalf of Liech­ten­stein, both about implementation of the tax information exchange agreement signed in December 2008. Eizenstat referred all questions to the embassy.

In an e-mailed statement, Matt Keller, an adviser at the embassy, said the agreement is scheduled to enter into force on Jan. 1, 2010, and “provides for direct cooperation between the two countries’ tax and judicial authorities.”

Regarding Levin’s bill, Keller said, “Liechtenstein does not take a position on US legislation.” Clearly, other places don’t feel the same way.

Carrie Levine may be contacted at carrie.levine@incisivemedia.com.