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<b><small><small><small><small><a class="moz-txt-link-freetext" href="http://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware?CMP=share_btn_fb">http://www.theguardian.com/us-news/2016/apr/06/panama-papers-us-tax-havens-delaware?CMP=share_btn_fb</a><br>
<br>
</small></small></small></small></b><big><big><b>Forget
Panama: it's easier to hide your money in the US than almost
anywhere</b></big></big><br>
<br>
Jana Kasperkevic - April 6, 2016<br>
<br>
One of the surprises about the Panama Papers – the largest leak from
an offshore tax adviser in history – is how few Americans have so
far been exposed. The reason? It may be because creating a shell
company in the US is easier than obtaining a library card.<br>
<br>
What is Mossack Fonseca, how big is it, and who uses offshore firms?
Key questions about one of the biggest ever data leaks<br>
<br>
About 200 people with US addresses have so far been revealed as
clients of Mossack Fonseca, the firm at the center of the Panama
Papers leak. Compared with countries such as China, Switzerland,
Russia and the United Kingdom, the number is small.<br>
<br>
The anomaly may be because it’s so easy to create a vehicle to hide
your money and your identity in the US that there’s no need to mess
with Panama, according to Shruti Shah, vice-president of programs
and operations at Transparency International, an anti-corruption
organization.<br>
<br>
“You don’t really have to go to Panama or other tax havens. They are
not the only ones making it possible for corrupt officials and other
criminals to launder their money. You can do it in every state in
the US,” explained Shah.<br>
<br>
Delaware is so synonymous with anonymous companies that it was named
as one of the most symbolic cases of corruption<br>
<br>
“In every state in the US, you can incorporate an LLC – [a limited
liability company] – or another legal entity and you don’t have to
disclose who the beneficiary on it is. In fact, Delaware is so
synonymous with anonymous companies and ghost corporations that it
was named in Transparency International’s Unmask the Corrupt
campaign as one of the most symbolic cases of corruption.”<br>
<br>
The term tax haven usually evokes an image of some faraway place
like Belize or the Cayman Islands. Yet in 2015, in a ranking of tax
havens most attractive for those looking to hide assets, the US came
in third – surpassing Cayman and Singapore. The two places that were
even better suited as tax havens for the rich were Switzerland and
Hong Kong, according to the Tax Justice Network that published the
ranking.<br>
<br>
What was Panama’s ranking? It was 10 spots behind the US, at 13.<br>
hidden owners panama papers<br>
<br>
A while back, Shah sent her husband to return an overdue book she
had borrowed from the library. When he returned, he told her her
library card was expired and that to renew it she would have to
bring her driver’s license showing her current address or a utility
bill with her address.<br>
<br>
“If I were to open a shell company, I wouldn’t require any of those
things. I would actually need less information to open a shell
company in the US than I would need to get a driver’s license or a
library card,” pointed out Shah.<br>
<br>
But financial secrecy index report notes if UK and affiliated tax
havens such as Jersey were treated as one, it would top the list<br>
<br>
Is this in every state or just some like Delaware where the majority
of US companies are incorporated ? “No state in the US requires
beneficial ownership information. So it’s practically everywhere,”
explained Shah, who lives in Virginia. “Some states are easier than
others. In some states it’s more money than others, because they
also have tax-friendly laws. Delaware and Nevada and Wyoming are
infamous – or famous, however you look at it – [for their tax laws].
Texas and Florida are equally easy.”<br>
<br>
There is nothing illegal about setting up a shell company. US states
are proud of their business-friendly policies. Delaware, for
example, prides itself on being the incorporation capital of the US.
“More than 1,000,000 business entities have made Delaware their
legal home,” claimed the state’s Division of Corporations website.
“More than 50% of all publicly-traded companies in the US including
64% of the Fortune 500 have chosen Delaware as their legal home.”<br>
<br>
In the wake of the Panama Papers, the number of shell companies
incorporated in the US could grow. Instead of stashing their cash in
Belize, Panama or the Cayman Islands, the companies and individuals
could turn to the US.<br>
<br>
“They certainly could,” said Heather Lowe, director of government
affairs at Global Financial Integrity. “Given the lack of action in
the US to address this issue compared to, say, the European Union,
it may seem like a safe bet right now.”<br>
<br>
I need less information to open a shell company in the US than I
would need to get a driver’s license or a library card<br>
<br>
Shell companies have their uses; they can be used to buy land
anonymously, for example, without tipping off the competition. To
create an entity to protect future business rights, or a holding
company for various businesses. They can also be used to, legally,
make political contributions anonymously.<br>
<br>
Just because some people or companies have chosen the state to form
shell companies and hide assets does not mean the entire system
should be to blame, argued Charles Elson, director of the John L
Weinberg Center for Corporate Governance at the University of
Delaware.<br>
<br>
“Delaware really is not a tax haven. Delaware is a place where most
US companies are incorporated, because of a very intelligent
corporate law regime,” he said. “Obviously, some companies that are
problematic come here, too, but that’s not the design of the system.
That’s a collateral effect … If someone uses the corporation for
nefarious purposes, I don’t think that’s the fault of the corporate
statute, but of the individual.”<br>
<br>
Shell companies, whether created abroad or at home, make it easy for
people to hide assets and commit crimes, said Shah. For example, in
the mid-2000s, former Louisiana congressman William Jefferson had
created eight different shell companies to hide hundreds of
thousands of dollars of bribes. Viktor Bout, an infamous arms
trafficker known as the Merchant of Death, had at least a dozen
shell companies incorporated in Delaware, Texas and Florida to cover
up his weapons trafficking operation.<br>
<br>
There is no reason, said Shah, why creating such shell companies
should be easier than obtaining a library card. Her group
Transparency International has called on the US Congress to pass the
Incorporation Transparency and Law Enforcement Assistance Act
introduced by congresswoman Carolyn Maloney and Senator Sheldon
Whitehouse. If enacted, the bill would require states to collect,
maintain and update information about beneficial ownership of all
companies created in the US.<br>
<br>
“Bipartisan legislation has been introduced in the House since 2008,
but it has never seen the light of day. It’s never been enacted into
law. Maybe now is the time,” said Shah.<br>
<br>
Elson remains skeptical as to whether such a law would actually
work.<br>
<br>
“I don’t know how fixing the beneficial ownership rule would fix
this. If someone is devious enough to game the system in this way,
they would work their way around any single regulatory change. These
are very clever people,” he said.<br>
<br>
In order for any legislation to pass, the US business community
would have to come out in support of it, pointed out Lowe.<br>
<br>
“The US Chamber of Commerce has long opposed legislation to end
anonymous companies, and they must reverse that position and begin
to support honest and open business practices,” she said.<br>
<br>
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