The furore created by the Panama leaks is a debate with various separate strands: the line between tax avoidance and evasion, the acceptability or otherwise of tax planning by the wealthy, and the ethics of secrecy and the jurisdictions that sell this – the so-called offshore industry.
At the end of last week, finance ministers from five of Europe’s most significant tax authorities, the UK, Germany, France, Spain and Italy, said they would ‘develop a standard of automatic exchange of beneficial ownership information’. George Osborne described this as a ‘hammer blow against those who hide their illegal tax evasion in the dark corners of the financial system’.
The OECD is also keen to promote its work in this area, and at the end of last week was pressing for the final few jurisdictions to sign up to automatic exchange of information and common reporting standard initiatives. These aren’t new but have gained fresh momentum following recent transparency developments.
But where is the US in all of this? Panama and Bahrain have been singled out by the OECD for showing no inclination to sign up, but the US is also missing from this list, instead featuring in a lengthy footnote as doing their own thing, via FATCA and intergovernmental agreements.
The US has no federal public register of companies. The legal framework for corporates is a matter for each of the US’s 50 states individually with some, like Delaware, not requiring owners to be identified. This would appear to make it impossible for the US Government to sign up to the OECD transparency initiatives. Only sovereign nations can legally commit to the OECD agreements, but the jurisdiction as far a company ownership is concerned lies with 50 separate states. With no equivalent of the UK’s Companies House, financial information is also not publicly accessible for private companies.
With all the focus on places such as Panama, the US might just be keeping quiet in their own dark corner, hoping no one will remember that Delaware is one of the most private places in the world to set up a company.
If you would like to discuss any of the issues further, please contact Rebecca Reading or your usual RSM contact.