Tag Archives: Tax Cheats

The Panama Papers? Why Not The Delaware Papers?

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While the Panama Papers exposed thousands of politicians and billionaires who have used off-shore tax havens to hide trillions of dollars from taxes, the leaked papers will likely have little effect on Americans. It’s not that American corporations, billionaires and politicians are any more trustworthy than their foreign counterparts. It’s just that they don’t need to hide their money in the Cayman Islands when they can hide it in a much safer and less transparent refuge…the United States.

That’s right, the US is quickly becoming the world’s capital for money-laundering and tax shelters. Outside of Kenya, the US is now the easiest country in the world to open an anonymous shell corporation. No need to move your money off shore; no need to hire a Panamanian law firm; no need to place your trust in the economy of a third world country. Instead, you can open a shell company in Delaware, Nevada or South Dakota that will allow you to invest your money anonymously.

A recent article in the Washington Post noted that, if it weren’t for such schemes, the US Treasury would annually collect an additional $36 billion from wealthy individuals and an additional $88 billion from multinational corporations. That’s $124 billion a year that could be used to pay for public schools, to rebuild our crumbling infrastructure, and to improve public transportation!

And US citizens are not the only ones who are taking advantage of our lax tax laws.

According to TaxHavenUSA.com, the US has become the world’s largest tax haven for wealthy non-residents. You see, Congress, in an attempt to encourage more investment in US securities, made it easier for non-residents to invest through “pass through” or “disregarded” tax entities. These are the same vehicles the Koch brothers and their wealthy rightwing friends are using to influence elections without disclosing the source of their funding.

Through these LLCs, non-residents can easily open US financial accounts and make investments in securities without paying US taxes on the income they earn. They can avoid US capital gains taxes. Further, the investors in these entities can operate businesses outside the US while taking advantage of US corporate tax write-offs and incentives. Thanks to a variety of treaties, non-resident investors can reduce their tax liabilities in other countries, as well. They can transfer income to other, lower tax nations. All the while their investments are protected by the full faith and credit of the US. Their US bank accounts are even protected by the FDIC! Best of all, the investors in these entities can all remain anonymous.

So if you’re expecting the Panama Papers to reveal names like Charles Koch, David Koch, Sheldon Adelson, Mitt Romney, or Donald Trump alongside such people as David Cameron, Vladimir Putin and the House of Saud, don’t hold your breath. Like me, you’re probably going to be sorely disappointed.

How The Wealthy Avoid Taxes.

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Last fall’s presidential election shed light on the issue of offshore tax havens. Thanks to the fact that, as a presidential candidate, Mitt Romney was forced to reveal his income tax returns, many people now better understand how the world’s wealthiest people avoid taxes by stashing their often ill-gotten fortunes offshore.  According to the Tax Justice Network, up to $32 trillion in assets are stashed in a country where the owner of those assets has no legal or tax residence.

The primary reasons for sending assets offshore? Tax avoidance and money laundering.

Most of the countries housing the assets are chosen for their secrecy, their low tax rates and willingness to help the wealthy get around the laws of their own countries. Of course, Switzerland is the most famous of these tax shelters and, not surprisingly, the largest in terms of offshore assets. Others, in descending order, are Hong Kong/Singapore, Ireland/Channel Islands, Caribbean/Panama, the United Kingdom, the United States (yes, some time in the 1980’s, we changed our tax laws to create tax havens for non-US citizens), Monaco/Dubai/Luxembourg and assorted other playgrounds for the rich.

An investigative series on offshore money by the International Consortium of Investigative Journalists exposed the extent of “the global offshore money maze.” And it’s not just shady business tycoons who take advantage of offshore tax havens. Those who stash their money in other countries include royal families, bankers, celebrities, lawyers, politicians, doctors, publishers, mercenaries, hackers, drug lords and more.

The practice may not be illegal. But it is unethical and highly destructive to the countries where the money was obtained. Meanwhile, people like you and me make up for the taxes the wealthy avoid.