US Government to block the OECD crackdown on "tax havens'', The Royal Gazette can reveal.

House of Representatives Majority leader Dick Armey is urging the US Treasury to oppose the Organisation for Economic Development and Cooperation bid to clampdown on what it considers "harmful'' low tax jurisdictions.

Bermuda escaped inclusion on the OECD `hit list' in June after agreeing to make unspecified changes, but 35 other jurisdictions were given 12 months to agree to open up their tax regimes by 2005 or face sanctions.

The Republican Congressman has written to Treasury Secretary Lawrence Summers warning that the 29-nation OECD move threatens the sovereignty of these jurisdictions and could lead them to withdraw cooperation from the US in the fight against drugs.

In the letter, seen by The Royal Gazette , he writes: "This effort is designed in effect to create a tax cartel and, if the OECD succeeds, our nation will face the risk of higher taxes and a weakened economy while developing nations will be hamstrung in their attempts to promote economic growth.'' The Texas Congressman has been campaigning for a "flat tax'' to be introduced in the US to replace income tax.

He continued: "It is not the role of the OECD to tell the US -- or any other member country -- how to conduct tax policy, particularly when those changes would increase the tax burden on individuals and businesses.

"The OECD is even trying to impose its will on nations that are not members of the organisation, calling for draconian measures against so-called tax havens. Sovereign nations should be free to determine their own tax policies.

"(US) citizens would not respond well if other countries tried to dictate our tax laws, and it hardly seems right for us to participate in a campaign to force other nations to change their tax laws.

Armey criticises OECD "What incentives will these nations and territories have to support US criminal investigations if we threaten their ability to maintain pro-growth policies? "If developing nations are not allowed to create an attractive investment climate their economies will doubtless suffer. The end result would be less cooperation and fewer resources deveoted to fighting international crime.

"Mr. Secretary, I hope you are not committing the US to actions that are unlikely to receive the approval of Congress. In upcoming years, we intend to implement tax cuts that will make America more attractive to the world's investors, regardless of whether the bureacrats of the OECD think this is `harmful competition'.

"The financial protectionism that the OECD wants to impose against low tax regimes is against our national interests and would also endanger the economies of other nations.

"Adopting the OECD's policy not only represents a major change in tax policy, it hinders our efforts to reduce the US tax burden and reform our unfair tax code.

"It also poses a serious risk to continuing prosperity and prosperit around the globe.

"I urge you to summarily and immediately reject this policy and look forward to learning the actions you plan to take to stop the OECD from moving forward.''