Washington: The US is emerging as a top tax haven alongside the likes of Switzerland, the Cayman Islands and Panama, those seeking reform of the international tax system say. And states such as Delaware, Nevada, South Dakota and Wyoming, in particular, are competing to provide foreigners with the secrecy they crave.
“There’s a big neon sign saying the US is open to tax cheats,” says John Christensen, executive director of the Tax Justice Network.
America’s openness to foreign tax evaders is coming under new scrutiny after the leak this week of 11.5 million confidential documents from a Panamanian law firm. The Panama Papers show how some of the world’s richest people hide assets in shell companies to avoid paying taxes.
Christensen’s group, which campaigns for a global crackdown on tax evaders, says the US ranks third in the world in financial secrecy, behind Switzerland and Hong Kong but ahead of notorious tax havens such as the Cayman Islands and Luxembourg.
Under a 2010 law, passed after it was learnt that the Swiss bank UBS helped thousands of Americans evade US taxes, the US demands that banks and other financial institutions disclose information on Americans abroad to make sure they pay their US taxes.
But the US does not automatically return the favour.
More than 90 countries have signed on to a 2014 information-sharing agreement set up by the Organisation for Economic Co-operation and Development, but the US is among the few that have not joined.
American banks do not even collect the kind of information foreign countries would need to identify tax dodgers.
“The banking lobby has resisted changes in the law that would allow more sharing of data,” says Peter Cotorceanu, a Zurich-based lawyer who specialises in private banking.
In a report last year, the Tax Justice Network complained that “Washington’s independent-minded approach risks tearing a giant hole in international efforts to crack down on tax evasion, money laundering and financial crime.”
It said foreign elites have “used the US as a bolt-hole for looted wealth.”