BUSINESS

The U.S. Is A Tax Haven. Obama Wants To Change That.

Of course, he needs Congress to help.

The Obama administration announced Friday that it will begin cracking down on common money laundering and tax evasion schemes in the aftermath of the Panama Papers leaks. 

The Panama Papers, a trove of 11.5 million documents leaked from the Panamanian law firm Mossack Fonseca in early April, revealed the true owners of thousands of shell corporations set up by the law firm. Keeping money offshore is not always illegal, but is often done to avoid having to pay taxes on it back home. 

What is less well-known is that the U.S. is itself a tax haven, with plenty of loopholes in the tax code to make its wealthiest citizens perfectly happy to park their money at home.

Obama said in a speech Friday he wants to change that.

While fully closing tax loopholes requires an act of Congress, the president outlined some ways the executive branch is working to do its part.

"It would make sure that families and small businesses who don't have fancy lawyers and fancy accountants are being treated the same as big corporations who do," Obama said in his speech Friday.

"In recent months we've seen just how big a problem corruption and tax evasion have become around the globe," he said. 

"Combatting this kind of tax evasion and strengthening the global financial system have been priorities of mine since I took office, and they're part of our broader ongoing efforts to make sure that the rules aren't rigged and our economy works for everybody."

On Thursday, the Treasury Department announced a new rule that requires banks and other financial institutions to "collect and verify the personal information of the real people (also known as beneficial owners) who own, control, and profit from companies when those companies open accounts."

The White House's short explainer on the topic notes that "while the beneficial owners of shell companies often exploit weak rules in offshore tax havens, gaps also exist in U.S. tax rules that foreigners can currently exploit to set up and hide their assets or financial activity in an anonymous shell company in the United States."

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