Why Americans not included in #PanamaPapers

The documents, related to a Panamanian law firm that specialises in creating shell companies for many of the world’s richest people, provide a glimpse into how secret fortunes and ill-gotten gains are moved through a shady financial network, according to the International Consortium of Investigative Journalism, which worked with news organisations around the world to analyse the files. The clients and connections included current and former world leaders, famous athletes and billionaires, but also notorious underworld operatives. The ICIJ says people in the US were involved. But hardly any are among the bold-faced names made public. One exception is Chicago-based financial coach and author Marianna Olszewski — who, according to ICIJ member the BBC, allegedly used the firm, Mossack Fonseca, to hide her name as the owner of a secret offshore account. The seeming dearth of Americans in the reports doesn’t necessarily mean that US citizens are more upfront, or more law abiding, than their counterparts around the world, experts said. But there are a number of possible reasons why so few have showed up in the coverage. First, this was a leak of more than 11m documents, and it will take some time for the ICIJ to scour them. “So maybe there are revelations about specific Americans and secret funds that we haven’t heard about,” said Matt Gardner, executive director of The Institute on Taxation and Economic Policy, a research organisation. At the same time, it’s possible that Americans who do this sort of thing simply worked with law firms other than Mossack Fonseca. There are numerous other firms, large and small, American and foreign, that help wealthy clients set up offshore shell corporations — which isn’t of itself illegal, as long as the clients aren’t trying to hide criminal proceeds or dodge tax collectors, experts said. “This firm is one of thousands in the world and there are hundreds or thousands just like it in the US,” said Ana Owens, a tax and budget advocate at US Public Interest Research Group (PIRG), a federation of state-level consumer advocacy organisations. “If a company in the US can do the exact thing for you as this company in Panama, then you might as well do it right here in the US and its perfectly legal, which is the issue.” She cited a series of stories by the Portland Business Journal last year that revealed federal authorities’ failed attempts to catch a California-based “corporation mill” committing fraud, despite evidence of financial crimes by companies related to the firm. In January, the British activist group Global Witness found several New York real estate lawyers who expressed willingness to help an undercover reporter form shell companies to secretly move suspect money from Africa.US itself a tax havenTwo states, Delaware or Nevada, along with the US Virgin Islands, are known in particular for loose regulations and low taxes, making them attractive for people to hide their activities and assets behind a corporate facade. The British-based Tax Justice Network released a “Financial Secrecy Index” of popular tax havens last fall that ranked the US third, behind Switzerland and Hong Kong, and far higher than Panama, at 13th. What may keep more super-rich Americans from seeking tax havens is that they have less to lose, said Lee Sheppard, an expert in international finance at the nonprofit research organisation Tax Analysts. “For Americans, taxes aren’t all that high relative to other developed countries,” Sheppard said. But that doesn’t keep some from trying. Larry Langdon, a former Internal Revenue Service commissioner, said many of America’s biggest businesses, including Apple and Google, legally cut their tax burdens by forming companies in countries with even lower rates than the US — not only typical havens like islands in the Caribbean, but also job-hungry countries like Ireland. The IRS wants to catch Americans who are breaking the law by hiding assets. But that has become difficult as budget cuts have forced the IRS to prioritise large corporations over wealthy individuals, he said. Reform advocates say one possible solution lies in a bill pending in Congress called the Incorporation Transparency and Law Enforcement Assistance Act, which would require states to collect data on the “beneficial ownership” of shell companies. That information could be made available to investigators. If they get their way, advocates say, Americans would have fewer opportunities to hide assets.