The Strategist

'Panamagate' raises hot-button tax evasion issue in the US

05/06/2016 - 13:47

US authorities proposed to introduce a number of new laws, which should help in the fight against tax evasion and money laundering. Among other things, the new regulations demand financial institutions to reveal true owners of companies, including foreign ones. The discussion of the need to introduce new rules intensified in connection with the ‘Panamagate’ scandal flared up in April.

On Thursday, the US government proposed a new law that should prevent money laundering and tax evasion through offshores. Under the new rules, financial institutions will have to identify owners of these companies with which they do business. These rules inter alia must prevent criminals and terrorists from using anonymous companies to make financial transactions. Banks and brokers have to check all persons holding not less than 25% of the company, as well as those who control the company. The new rules are yet to be approved by Congress.

Also, the Ministry of Justice and the US Treasury proposed new rules that would help law enforcement agencies prevent money laundering and corruption. Under new rules, the authorities will more easily deal with loopholes that allow some foreign citizens avoid paying US taxes. Administration of US President Barack Obama appealed to Congress, proposing to change requirements for companies registered in the United States. At the suggestion, the companies should be obliged to provide the authorities with information about who owns them and controls them. Now, small foreign companies may not provide information to the tax authorities. "Our laws are loopholes that allow violators to consciously use US companies to hide money laundering, tax evasion and other illegal financial activities", - US Treasury Secretary Jacob Lew. Another package of new rules developed by the US Department of Justice offers to facilitate evidence-gathering procedure for the subpoena in some cases related to corruption.

The new rules have been proposed by the Ministry of Finance in 2014, but their active discussion started just a month ago. The new wave of struggle against offshore companies was caused by publication of the "Panamanian files." Recall that the International Consortium of Investigative Journalism (ICIJ) has received access to data of Panamanian law firm Mossack Fonseca. At the beginning of April, the organization revealed the scandalous information. EU authorities have promised to impose sanctions on jurisdictions that refuse to share information.

Back in 2010, the US government adopted a tax law FATCA, which requires financial institutions to disclose information about foreign accounts of American citizens, and to report about them to the US Internal Revenue Service (IRS). "Reciprocity with other jurisdictions (FATCA partners) is a key component of a successful strategy to combat international tax evasion ", - said Mr. Lew.