One of the co-founders of the law firm at the centre of last year’s “Panama Papers” scandal has said that the fallout from that scandal has triggered a boom in the creation of tax shelters in the US, even though the due diligence standards in many cases are not as good as in the offshore jurisdictions now being shunned, according to a report published by the Agence France-Presse news agency.
Citing as its source a document that it said it had obtained yesterday, AFP quoted Juergen Mossack, who co-founded the Panamanian firm Mossack Fonseca, as saying that since the Panama Papers scandal broke, “the number of new tax shelters created has fallen by 30% in Panama and elsewhere”.
However, he added, according to AFP, “jurisdictions such as Delaware, Nevada and others located in the United States, where virtually no due diligence is required… incorporations are thriving”.
“Whilst Panama tries hard to be whiter than white, others are profiting,” the news agency story, datelined Panama City and published in such publications as the South China Post and Straits Times, quotes Mossack as saying.
AFP didn’t provide details about the type of document it had obtained which contained Mossack’s comments, or how it came to have it. Mossack Fonseca didn’t immediately reply to requests for comment.
As reported, the Panama Papers scandal broke in early April of last year, after more than 11 million documents said to have originated in the Panama office of Mossack Fonseca found their way to a New York-based investigative journalism organisation, which orchestrated a simultaneous publication of their revelations by some 107 media organisations as the BBC and the UK’s Guardian newspaper, in 78 countries around the world.
The documents linked some of the world’s most powerful leaders, including Russian President Vladimir Putin, former British prime minister David Cameron and others to unreported offshore companies.
As the AFP report notes, one of the effects of the scandal was to prompt a previously-recalcitrant Panama to agree to sign up to international initiatives aimed at creating greater transparency and battling fraud, money-laundering and tax evasion, including the OECD’s automatic information exchange programme known as the Common Reporting Standard.
Yet, as AFP quotes Mossack as pointing out, this degree of transparency or regulatory compliance isn’t currently being required in the US, thus prompting those interested in keeping their wealth hidden to move it out of places like Panama, and into the US.
US ’emerging tax haven’
Mossack isn’t alone in this observation: Even before the Panama Papers scandal broke, in January 2016, Bloomberg published what was to be the first of a series of major articles by global media organisations about how the US was fast becoming the world’s favourite hiding place for wealth.
Said Bloomberg: “After years of lambasting other countries for helping rich Americans hide their money offshore, the US is emerging as a leading tax and secrecy haven for rich foreigners.
“By resisting new global disclosure standards, the US is creating a hot new market, becoming the go-to place to stash foreign wealth. Everyone from London lawyers to Swiss trust companies is getting in on the act, helping the world’s rich move accounts from places like the Bahamas and the British Virgin Islands to Nevada, Wyoming, and South Dakota.”
London’s Financial Times followed up a few months later, with a full-page article headlined “The new Switzerland?”.
It called attention to the fact that assets held in trusts registered in the remote, sparsely-populated state of South Dakota held some US$226bn in 2014, up from just US$32.8bn eight years earlier.