The Economy: U.S. beginning to emerge as haven for tax cheats
WASHINGTON >> The U.S. lambastes and strong-arms countries that help drug lords and millionaire investors hide their money from tax collectors. Critics say it should look closer to home.
America itself 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 with each other to provide foreigners with the secrecy they crave.
"There's a big neon sign saying the U.S. 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.
Sworn to secrecy
Christensen's group, which campaigns for a global crackdown on tax evaders, says the United States 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 learned that the Swiss bank UBS helped thousands of Americans evade U.S. taxes, the United States demands that banks and other financial institutions disclose information on Americans abroad to make sure they pay their U.S. taxes.
But the U.S. doesn't automatically return the favor.
More than 90 countries have signed on to a 2014 information-sharing agreement set up by the Organization for Economic Cooperation and Development; the U.S. is among the few that haven't joined. American banks don't 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 specializes 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 United States as a bolt-hole for looted wealth."
Pascal Saint-Amans, head of the OECD's Center for Tax Policy and Administration, says the U.S. often makes information available to other countries upon request. But that means countries can get details only on those they already suspect of tax evasion.
Christensen says Swiss banks report that "many of their tax-dodging clients are talking about moving to the U.S. You go to Switzerland, and that's all they're talking about." States like Nevada, Wyoming and South Dakota, are making things worse, critics say.
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