As has become almost cliché at this point, the international tax regime is facing a defining moment … spearheaded by the Base Erosion and Profit Shifting (BEPS) project of the Organization for Economic Cooperation and Development (OECD). While BEPS addresses a wide-ranging number of topics, one of its primary focuses is combating tax havens. BEPS is the successor to the 1998 OECD Harmful Tax Competition project which, unlike the wide ranging BEPS, focused almost exclusively on a “name-and-shame” campaign against tax havens. These anti-tax haven efforts can trace their history back to the enactment of “Subpart F” of the Internal Revenue Code which is typically considered the first concerted anti-tax haven effort. The intellectual force behind Subpart F was Assistant Secretary of Treasury for Tax Policy Stanley Surrey (while he was on leave from the faculty at Harvard Law). Surrey has been referred to as the greatest tax lawyer of his generation; his influence can be felt to this day throughout the tax laws of the United States and the world.
In the face of this towering presence, Steven Dean dares to ask the question “Was Surrey racist?” in his new article Surrey’s Silence: Subpart F and the Swiss Subsidiary Tax that Never Was. This question is not buried in a footnote or even in the final section but is the first three words of the abstract. The effect is palpable, in part because the reader is forced to consider the provocative question in a vacuum without the benefit of reading the article itself. As with all good use of rhetorical hyperbole, Dean effectively employs strong language to shake the reader’s assumptions and open space to consider a difficult topic in a deep and subtle way.
Dean deftly works within this newly opened intellectual space to introduce the broader thesis of the article – is it possible that the international tax regime as a whole could be imbued with implicit bias from its founding? The argument (substantially simplified) goes as follows: (1) Surrey and his team began the Subpart F project focused specifically and primarily on Switzerland. which was the jurisdiction of choice for the largest US corporations seeking to avoid or evade US taxes; (2) by the time Subpart F was signed into law, Switzerland had disappeared from the legislative narrative; and (3) in its place a new narrative had emerged focusing mostly on small, Caribbean island nations as so-called tax havens.
The article utilizes the so-called “Liberia problem” developed in earlier work as an illustrative example. In summary, the article explains how Liberia was included on one of the first iterations of lists of abusive tax havens, without any tax-related justification. Despite repeated efforts, neither Liberia nor academic tax experts could get Liberia removed from the list, despite consensus that there was no substantive reason for its inclusion. It was not until extraordinary efforts were undertaken by the United States that Liberia was eventually removed from the list. At first it might not seem clear what this has to do with Stanley Surrey, and I think ultimately that is the point. From this perspective, the Switzerland example and the Liberia example stand in stark contrast. There was overwhelming evidence of Switzerland’s role as a tax haven, yet all mention of it was scrubbed from the ultimate version of Subpart F. In contrast, there was no evidence of Liberia’s role as a tax haven, yet overwhelming efforts were necessary for it to be removed from a list of tax havens. The article leaves the reader to sit in that contrast, forced either to attempt to intellectually rationalize the two examples or yield to Occam’s Razor and admit the obvious racial difference.
This epiphany unifies the paper, and the opening rhetorical question slowly begins to take shape in context. Was Surrey racist? Does it matter? Or might the better question be – did Surrey’s legacy manifest itself as implicit racial bias throughout the international tax regime? Regardless of Surrey’s actual beliefs, the article highlights that today there is no doubt that the term “tax haven” in fact invokes visions of beaches in the Caribbean and not snow in the Alps thus raising the question – why does virtually every academic article use the Cayman Islands or Bermuda as examples of a tax haven rather than Switzerland or Ireland?
Under this framework, the article then narrows focus from the regime as a whole to the term “tax haven” itself. Since at least the 1998 OECD Harmful Tax Competition project the term “tax haven” has been explicitly associated with “harmful” competition. In fact, the “tax haven” label has been used consistently as a cudgel; today merely being labeled a “tax haven” can be enough to force changes in policy. But what if the term is also tainted with implicit racial bias (in the sense of a bias against applying the label to majority-white countries)? In that case, the conclusion quickly emerges that explicit normative association of “tax haven” with “bad” can construct an implicit and powerful association of “bad” with majority non-white countries.
While reading the article I found myself repeatedly thinking, “if someone as brilliant as Surrey couldn’t recognize his own implicit bias, then what chance do I have?” Rather than feel hopeless, however, I found the internal dialogue inspiring. What if the one crucial difference between Surrey and myself is precisely that I am having this internal dialogue? In this respect perhaps the greatest strength of Dean’s article is its ability to engage a reader in such a dialogue, and thereby invite the reader to join the difficult, at times painful, and ultimately crucially important life-long conversation the world needs.
