Beyond Panama: What the World Really Needs Is the #DelawarePapers

SPOTLIGHT, CAPITALISM, WHISTLEBLOWING - SURVEILLANCE, 11 Apr 2016

Nika Knight – Common Dreams

‘That giant sucking sound you hear? It is the sound of money rushing to the U.S.A.’

Delaware is the most popular tax haven in the U.S., not even requiring an I.D. to register a shell company. (Photo: Ken Lund/flickr/cc)

6 Apr 2016 – Panama saw populist protests on Wednesday [6 Apr] in response to Panama Papers revelations that the nation’s lax tax laws are providing a haven for the world’s wealthiest to stash their cash. But in the United States, where observers note that corporate greed is surely not lacking, the leak has yet to produce such a grassroots display of outrage.

This may be because U.S. one-percenters have largely escaped the leak unscathed (more Czech nationals were named in the documents than Americans), and also because wealthy Americans already call one of the world’s foremost tax havens their home.

Beyond Panama

“The U.S. is one of the easiest places to set up an anonymous shell company to move ill-gotten gains around the world. It’s also one of the most popular places to do so for the criminal and corrupt,” writes the UK-based anti-corruption group Global Witness.

Mossack Fonseca, the tax advisory firm whose documents were leaked in the Panama Papers, had set up offices in Nevada and Wyoming—two of the most egregious tax havens in the U.S.—so as to better enable the firm to take advantage of those states’ lax laws on behalf of its international clients.

The phenomenon is not a new one. “Already the largest location for managing foreign wealth,” the Economist wrote back in February, the U.S. “has picked up business as regulators have increased information-exchange and scrutiny of banks and trust companies in Europe and the Caribbean. Money is said to be flowing in from the Bahamas and Bermuda, as well as from Switzerland.”

U.S. tax haven states enjoy the benefits of the incorporation fees, and have lobbied fiercely against stricter regulation. Furthermore, the CIA and other spy networks make use of these lax laws in order to secretly funnel aid and weapons to various governments, among other uses, as the Panama Papers made clear—and so such agencies also continue to benefit from the status quo.

“How ironic—no, how perverse—that the USA, which has been so sanctimonious in its condemnation of Swiss banks, has become the banking secrecy jurisdiction du jour,” wrote Peter A. Cotorceanu, a lawyer at a Zurich law firm, in a recent legal journal. “That ‘giant sucking sound’ you hear? It is the sound of money rushing to the U.S.A.”

The Guardian points out, “in 2015, in a ranking of tax havens most attractive for those looking to hide assets, the U.S. came in third—surpassing Caymans and Singapore.”

“What was Panama’s ranking?” the newspaper writes. “It was ten spots behind the U.S., at 13.”

American Public Media’s Marketplace reports on the phenomenon:

“Wherever there is more secrecy afforded to the tax evader, that is where they will want to be,” said Michelle Hanlon, an accounting professor at MIT’s business school who specializes in offshore tax evasion.

Lately, U.S. states like Nevada and Delaware have come to offer relatively more secrecy than historic tax havens. That’s largely because of a U.S. push to get banks around the world to share more information about Americans with money abroad. Those moves ultimately led the Organisation for Economic Co-operation and Development (OECD) to come out with pretty tough international disclosure standards. Nearly every major country signed on. But not the U.S.

[…] As other countries tightened rules, a handful of American states became globally famous for making it easy for anyone to quickly and quietly form a company.

‘Little Cayman Islands’ in the U.S. of A

And before the Panama Papers put the terms “offshore tax haven” and “shell corporation” in headlines around the globe, reporters have highlighted the egregious tax evasion of the global elite—and how the U.S. has become an international stand-out in permitting it within its borders.

“The secretive business havens of Cyprus and the Cayman Islands face a potent rival,” Reuters reported this past January. “Cheyenne, Wyoming.”

Describing “a little Cayman Island on the Great Plains,” the news service reported on the doings of “Wyoming Corporate Services, a business-incorporation specialist that establishes firms which can be used as ‘shell’ companies, paper entities able to hide assets.”

“A corporation is a legal person created by state statute that can be used as a fall guy, a servant, a good friend or a decoy,” gushes the Wyoming company on its website, according to the Reuters report. “A person you control… yet cannot be held accountable for its actions. Imagine the possibilities!”

Las Vegas Review-Journal columnist John L. Smith writes, “Although the casino industry is often pointed to as a historical source of money laundering, one former federal law enforcement expert speaking on condition of anonymity said Monday, ‘Shell corporations are by far the biggest money laundering facilitation in Nevada—much bigger than the casinos. Casinos want to keep the money in. Shell corporations are in the business of moving the money out.'”

The most popular tax haven in the country is Delaware. The state with a population of less than a million collected about $860 million in incorporation fees and taxes from its absentee corporate owners, the New York Times reported back in 2012.

A reporter for Fusion went so far as to create a Delaware company in her cat’s name—fully disclosing those intentions to the company registering her shell company, the reporter only needed a credit card and less than five minutes’ time:

httpv://www.youtube.com/watch?v=R0nHETD1wxg

An Economic Black Hole

The ramifications of these states’ tax haven status loom far and wide and yet are, by design, extremely difficult even for experts to trace.

“This is necessarily an exercise in night vision,” as a 2012 Tax Justice Network report (pdf) describes it. “The subterranean system that we are trying to measure is the economic equivalent of an astrophysical black hole. […] Unlike in the field of astrophysics, however, the invisibility here is fundamentally man-made.”

“In many ways, the crucial policy question is what are the costs and benefits of all this secrecy?” the group asks.

Global Witness notes that anonymous shell companies created in tax havens like Delaware “have been used to make six-figure contributions to super PACs backing nearly every major presidential candidate this election cycle.” Such companies “contributed nearly $17 million to super PACS in 2012, nearly 17% of the total funds raised by businesses for super PACs that election cycle,” the group reports.

Indeed, as Common Dreams reported, the Clintons are in possession of a shell company themselves, and under current law Hillary Clinton is not required to disclose its existence or its earnings in her campaign finance reports.

‘The rich are their own nation’

As many have observed, the enormous scale of tax evasion around the world means that countries are relying on middle class and working class workers to pay their taxes—while the one percent can secretly hopscotch their cash from haven to haven.

Presidential contender Bernie Sanders condemned such greed in a recent tweet:

Corporate greed needs to end. They're taking advantage of the benefits of America, yet refuse to accept their responsibilities as Americans.

— Bernie Sanders (@BernieSanders) April 6, 2016

Globalization, it seems, has erased the borders of nations for the world’s wealthiest. “The very idea of countries dissolves into an impossibly complex digital network of shady dealings, undertaken by those with no particular loyalty to country and plenty to themselves,” argues Fredrik deBoer in a response to the Panama Papers in Foreign Policy, “Even referring to the country of origin of the super-rich seems quaint. The rich are their own nation now.”

Legislation Could Shed Light on Shell Games

Activists are fighting for change. Global Witness and other groups fighting tax evasion advocate for “The Incorporation Transparency and Law Enforcement Assistance Act (H.R. 4450 and S. 2489),”  which would “require all American companies, with a number of exceptions, to disclose the real people who own or control them when they are formed, and to keep that information updated.”

And it seems that some Americans will be taking to the streets: “From April 11-13 faith leaders, small business owners, voices from law enforcement and other community activists from over 25 states will gather in Washington, D.C.,” the group says, “to call on Congress to pass legislation that would end anonymous companies.”

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Nika Knight is a Common Dreams staff writer.

This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.

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