Obama to act on tax abuses

6 May 16

The US government has announced a host of new measures to crack down on secretive companies after the Panama Papers unveiled the scale of tax evasion worldwide.

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US president Barak Obama.

US president Barak Obama.

 

The White House said on Thursday night that President Barack Obama will make an executive order to close loopholes used by foreigners to hide money in the US and propose legislation to ensure that the true owners of secretive companies and accounts are identified.

In a statement, the White House said the Panama Papers – a trove of leaked documents that revealed ways the rich and powerful have made use of anonymous offshore companies to avoid tax – had brought the issues of illicit financial activity and tax evasion into the spotlight.

The revelations appear to have galvanised the US’s efforts to counter illicit financial activity, with some laws that were tabled long ago finally coming to fruition.

The White House, the US Treasury and the US Justice Department all announced legislation that the statement said would add to international efforts for greater transparency and prevent “criminals and tax cheats” from keeping their activities in the dark.

The measures include immediate executive action to enhance transparency and combat money laundering, terrorist financing and tax evasion.

For example, legislation would law enforcement authorities obtain evidence in money laundering and corruption cases and close loopholes that allow foreign citizens to conceal their activities behind anonymous US companies and avoid US taxes.

Stricter rules will be introduced for financial institutions to identify and record the true owners behind the entities that use their services.

Banks, brokers and others will be required to verify and document the identities of any person that owns more than 25% of or controls a company that uses their services.

The administration has also reportedly called on the US Congress to pass a number of measures to challenge offshore tax avoidance.

The leak of 11 million documents from Panamanian law firm Mossack Fonseca sparked international outrage after laying bare how world leaders, politicians, celebrities and criminals have used secretive offshore firms and tax loopholes to cheat the system.

While almost no government came away unscathed, the US faced even heavier criticism than most as it offers some substantial opportunities for secrecy.

The Tax Justice Network ranked the US third in its 2015 financial secrecy index, and states like Delaware and Nevada are well known for their lax laws when it comes to setting up a company.

  • Emma Rumney

    Emma is a reporter at Cooking Recipes International. She also writes for in the UK.

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