It isn’t just tropical nations like Panama that act as safe havens for tax avoiders; the US stands accused of the same thing according to a new study by the European Parliament’s Green faction. EurActiv Germany reports.
The release of the Panama Papers has been like opening Pandora’s Box: more and more countries around the world are seemingly ready to follow global rules on data exchange in order to curb tax fraud. But it’s not just the well-known tax havens like the Seychelles, the Virgin Islands, Panama and Liechtenstein that are being asked to up their efforts against tax loopholes, according to the findings of the Greens/EFA group.
While the European Union has moved to combat tax dodgers, the US falls short on tax transparency and data exchange, with major shortcomings identified in comparison with international standards. The Greens/EFA study, carried out by Andres Knobel of the Tax Justice Network NGO, suggests that the US is now the world’s largest tax haven.
The reason: Washington is reluctant to implement two international initiatives intended to tackle money laundering, corruption and tax evasion. The first involves proper registration and identification of who the beneficial owners of a company are and the second consists of the automatic exchange of banking details between tax authorities.
Catching one’s boss breaking the law currently seems like a lose-lose situation for all involved. There is support in the European Parliament for more protection to be given to whistleblowers, but it faces an uphill struggle. EurActiv Germany reports.
“The study shows that even the world’s largest economic power falls into the category of tax haven,” said Sven Giegold, the group’s economic and financial spokesperson. Although the US has benefitted from information provided by its allies, it has reciprocated with significantly less.
The study explains that this is because of differences in the law between states when it comes to registering a company. In 14 of the 50 states, a company can be established without naming an owner. As a result, the states of Delaware, Nevada and Wyoming are the worst offenders.
“The results of the study show that the US has grown into the largest tax haven in the world and that the EU cannot just stand idly by,” said Giegold. The EU should therefore put the US on its planned black list of tax havens and American banks, which do not release information on tax evaders, should be hit with fines, he added.
Outgoing US president Barack Obama has long fought for stricter penalties for non-compliant banks, but has had little luck getting his plans through Congress. Nevertheless, the study pointed out that the measures proposed by Obama would be insufficient and would not be enough to meet the standards of the inter-governmental Financial Action Task Force (FATF).