July 24, 2008 (LPAC) This morning, Jack Blum, a lawyer with long experience in investigating money laundering, tax evasion, and similar financial crimes, provided a useful assessment when he told the Senate Finance Committee that offshore tax havens, such as those that are scattered about the British Commonwealth, have their origins in something called the "revenue rule," a common law rule that says that no government should help enforce the tax laws of other governments. This "revenue rule," Blum said, has its origins in English common law during the Napoleonic era, when English courts upheld contracts between private parties that were intended to evade French customs duties. Since the revenue rule has expanded to become a basic principle of common law, one result has been that the IRS cannot enforce tax judgments against individuals or corporations if the money at issue is being held in an offshore bank.

The revenue rule has spawned an entire industry dedicated to helping people evade taxes in their own countries, mostly in the infamous British Commonwealth offshore financial centers such as the Cayman Islands and the British Virgin Islands, among others. Offshore banks actually sell services in the US and other countries to help people evade taxes they would otherwise have to pay their own governments. This is not unlike the British approach to terrorism, in that terrorists living in London are protected as long as they attack other countries.

Blum proposed a number of measures to deal with the problem, mostly having to do with requiring taxpayers to prove that their offshore companies are, indeed, real, rather than the shell companies usually set up to hide assets. However, Blum agreed with Sen. John Kerry (D-MA) when he said that without getting agreement with other countries to combat the problem, "it's just going to stay a game." Blum replied that "the revenue rule has to be taken down as an international principle."