We also discussed that some level of secrecy is still available in the US because Washington has not signed up to the OECD Common Reporting Standard (CRS) for international information exchange, preferring instead its own Foreign Account Tax Compliance Act (FATCA).
The Economist adds that America seems not to feel bound by the global rules being crafted as a result of its own war on tax-dodging. It is also failing to tackle the anonymous shell companies often used to hide money.
Now The Greens-European Free Alliance (EFA) group, a small political group in the European Parliament, has commissioned a new report The Role of the US as a Tax Haven and the Implications for Europe which also describes why the U.S. is “becoming the biggest tax haven on the planet.”
The U.S. is becoming one of the biggest tax havens, precisely because its legislation has loopholes when it comes to knowing who owns and control companies. The U.S. is a major financial centre but the transparency of its legal framework is not consistent with the responsibility involved in being a major financial hub.
Indeed, an investigation in 2012 found that creating an anonymous shell company is easier in the U.S. than in the rest of the world and states like Wyoming, Delaware and Nevada are among the most likely to supply untraceable shell companies to foreign clients.
Incorporation of companies in the U.S. is governed by state law and requires the filing of a corporate governance document.
- However, many states promoting the creation of corporations by non-residents do not require filing even basic ownership information.
- Arkansas, Mississippi, Colorado, Missouri, Delaware, New York, Indiana, Ohio, Iowa, Oklahoma, Maryland, Pennsylvania, Michigan, and Virginia do not require to identify either shareholders or managers.
New measures announced by President Obama last week to increase financial transparency are not ambitious enough (and will – for some – require Congress’ approval) to close the current gaps in US laws, which allow bad actors to deliberately use U.S. companies to hide money laundering, tax evasion and other illicit financial activities.
- Instead, the U.S. decided to sign a series of bilateral agreements with namely European countries but the exchange of tax information is not done through an equal partnership.
EU countries have to provide more tax information to the U.S. than this country is sending to Member States. This can create a strong incentive for those trying to hide from tax authorities to move their assets to the U.S., with less chance to be reported to EU authorities.
According to the Index, the U.S. holds almost 20% of the global market share of financial services for non-residents. Foreign assets in the U.S. amounted to $16,745 billion in 2013, almost double than the U.K. (second highest). In 2014 foreign direct investment in the U.S. reached $2.900 billion with almost 60% coming from the European Union (EU) ($325 billion of these EU-originating investments corresponded to depositary institutions, finance and insurance).
Even though the U.S. signed more than 100 IGAs, U.S. experts disagree on the validity of IGAs pursuant to U.S. domestic laws.
Contact the Tax Lawyers at
Marini & Associates, P.A.
Read more at: Tax Times blog