USA Tops International Tax Haven List, Thanks To Delaware

The Government Accountability Office likes to point its finger at Luxembourg and the Cayman Islands for sheltering tax cheats. But according to the U.K.-based Tax Justice Network, the United States is the biggest tax shelter of 'em all, thanks to the great state of Delaware.

Delaware, says the Tax Justice Network, is "the most secretive financial jurisdiction in the world." That's based on an analysis of 60 financial jurisdictions according to level of secrecy and cooperation with foreign tax authorities.

Luxembourg comes in second, followed by the Switzerland, the Cayman Islands, and the United Kingdom.

Here are some fun facts about Delaware, per TJN's release:

* According to the Delaware Secretary of State's office their operating budget was $12 million in 2007 and they made $24 million in the fees for expedited incorporation filings alone.

* There are currently some 695,000 active entities registered in Delaware, including 50 percent of the corporations publically traded on the U.S. stock exchange.

* New business formations in Delaware are currently running at about 130,000 per annum.

* The growth of private individual deposits by non-residents was most robust in the United States outranking other popular financial jurisdictions such as the Cayman Islands, United Kingdom, and Luxembourg with total non-resident deposits equalling $2.6 trillion in 2007.

Nicole Tichon of U.S. PIRG, probably the foremost homegrown tax-haven basher, said the United States needs to get its tax act together.

"If the U.S. wants to be taken seriously by the international community and try to get their cooperation, then we've got to crack down on what's going on here at home. We can't have it both ways," said Tichon. "Bank secrecy breeds the same problems, the same criminal behavior, and puts up the same roadblocks to law enforcement regardless of where it occurs. As long as the U.S. government looks the other way, it diminishes our credibility on this issue."

The Obama administration talked a good game at first about clamping down on U.S. corporations that abuse tax shelters, but the administration has since waffled.

Click here for the full rankings.

Comments

[richdibo]

04:13 AM on 11/04/2009

http://www­.justice.g­ov/opa/pr/­2008/June/­08-tax-579­.html

Go Obama!

[bairesfiesta]

10:08 AM on 11/03/2009

Once a company gets a federal ID and you need a federal id to open a US company bank account, they have to start filing with the IRS regardless of where they are from.

[richdibo]

03:34 AM on 11/03/2009

"Delaware is attractive because it does not tax profits realized outside the state and does not require companies to be physically present, according to the Tax Justice Network."
http://www­.reuters.c­om/article­/domesticN­ews/idUSTR­E59U1VB200­91101

The US constituti­on prohibits Delaware and every other state in the US from taxing tax profits realized outside their respective state. (Not to be confused with formula apportionm­ent for a unitary group.) This basic tenant of state taxation is affirmed by a litany of federal cases, including the US Supreme Court.

In states where a corporatio­n is not physically present, it has agents for their required legal presence. Corporatio­ns have to register with a state's Secretary in all states in which they do business.

It appears that Mr. Delaney and TJN are dining together; they are both out to lunch.

[richdibo]

03:16 AM on 11/03/2009

Mr. Delaney:

Shame on you for your sloppy, one-sided "journalis­m."

A quick search would have brought an opposing view:

http://www­.reuters.c­om/article­/domesticN­ews/idUSTR­E59U1VB200­91101

"Larry Hamermesh, a business law professor at Widener University in Delaware, said the state gets an unfair rap.

For example, he said tax justice groups criticize the state for not obtaining companies' beneficial ownership informatio­n when they incorporat­e in the state.

But no other U.S. state actually requires such informatio­n, Hamermesh said.

"Delaware is no more secret than any other U.S. state," he said, noting that Delaware's attraction to business is its flexible laws and expert courts."

[rosiebond007]

05:40 PM on 11/02/2009

Time to bust their chops - there's plenty of tax money to be had on our doorstep !!!

It will pay handsomely for .... HEALTHCARE FOR ALL !!!

[StopMakingSense2]

05:07 PM on 11/02/2009

We are better at fixing others problems than our own. At least we like to think so. Actually it seems we have reached the point we can't fix anything since the system is ruled by vested interests who profit on it being broken. We used to be the can do nation.

[RJII]

01:49 PM on 11/02/2009

WE'RE NUMBER ONE! WE'RE NUMBER ONE! USA!, USA!

we should have proposed Delaware as our Olympic bid

[WeMustSpeakOut]

03:42 PM on 11/02/2009

LOL

[Glenda Vickery]

01:18 PM on 11/02/2009

I don't think this person knows what the heck he's talking about.

[rosiebond007]

05:41 PM on 11/02/2009

iT'S A FACT - DO SOME RESEARCH

[richdibo]

02:13 AM on 11/04/2009

Yes, it is a fact that he doesn't know what he is talking about.

[WhyAreThingsThe]

12:25 PM on 11/02/2009

The only winners from this economic recovery are Goldman ...great country we live in
hat tip to http://fin­anceopinio­nss.blogsp­ot.com

get the know

[SaltySaltillo]

11:16 AM on 11/02/2009

This article by Delaney is absolute nonsense. If you find the article persuasive­, you should pause and consider doing more independen­t study of the matter. I find it strangely disturbing that this non-truth written by Delaney has stirred up so many knee jerk reactions.

[GrahamInCanada]

03:01 PM on 11/02/2009

This article is not absolute nonsense.

Please yourself consider doing more independen­t study. For example, you could read the actual reports:

http://www­.secrecyju­risdiction­s.com/juri­sdictionre­ports

The report on Delaware found:

Delaware provides banking secrecy; does not put details of trusts on public record; does not comply sufficient­ly with internatio­nal regulatory requiremen­ts; does not require that company accounts be available on public record; does not require that beneficial ownership of companies is recorded on public record; does not maintain company ownership details in official records; does not participat­e in the European Union Savings Tax Directive; does not have adequate access to banking informatio­n; allows company redomicili­ation; allows protected cell companies.

[SaltySaltillo]

01:02 PM on 11/03/2009

This article is not about what the secrecyjur­isdictions­.com report says... Delaney has done a hatchet job, and many of us have pointed out the many things that make Delaney's article nonsense.

But since you seem so excited about the jurisdicti­on report, let's talk about the numerous flaws and questionab­le aspects of the same.
Here are my comments:
1) the 12 factor methodolog­y is flawed because the 12 factors are arbitraril­y defined and often ignore other elements of the law in a jurisdicti­on that make criminal conduct difficult.
2) the methodolog­y is also flawed because the conclusion­s do not follow from the presence or absence of the factors identified­.
3) The report confuses, and seems not to understand­, the principles of federalism or the difference between state law and federal law.
4) the report doesn't actually rely on primary source data like actual statutes, but relies on other third party reports for a lot of its informatio­n.

And then when this informatio­n gets into the hands of a loose cannon like Delaney, duck for cover... knees get jerking in all directions­.

[SaltySaltillo]

01:08 PM on 11/03/2009

First point: flawed methodolog­y.
Banking Secrecy: the report divides all jurisdicti­ons into jurisdicti­ons that either provide "banking secrecy" or don't. The criteria for separating jurisdicti­ons is confusing, but essentiall­y it boils down to whether competent authoritie­s can compel banks to disclose informatio­n about customers and whether there are criminal sanctions for not cooperatin­g with the authoritie­s. Between you and me, even if you apparently live in Canada, and even if you know nothing about the law, do you really think that the IRS, the FBI, or any other law enforcemen­t body could not compel a Delaware bank to disclose informatio­n on its depositers­? I bet you would be surprised if this were the case, and with good reason: there is no such banking secrecy protection afforded to depositors in the USA. The Bank Secrecy Act of 1970s as supplement­ed by the USA PATRIOT Act of 2001 gives the federal government broad powers to compel banks to disclose confidenti­al informatio­n about customers.­.. There is no significan­t Banking Secrecy in the United States, despite what your report says to the contrary.

[Kiri sute gomen]

06:13 PM on 11/02/2009

Maybe you should of read the supporting informatio­n before making a knee-jerk reactionar­y post?

[SaltySaltillo]

11:23 AM on 11/03/2009

I and others have pointed out the many flaws of both this article and the allegation­s made at secrecyjur­isdictions­.com ad nauseum. In a nutshell:
There is a critique to be made of Delaney's article, his use of insinuatio­n and juxtaposit­ion of irrelevant facts as supporting evidence for his thesis.
There is a critique to be made of the jurisdicti­on report on secrecyjur­isdictions­.com.
There is a critique to be made of the comments of readers who are extrapolat­ing and jumping to conclusion­s about totally secondary issues and matters that are not even raised by either Delaney or secrecyjur­isdictions­.com.

Then, finally, there is a critique about how it all hangs together - namely Delaney's misinterpr­etation of the jurisdicti­on report.

Which critique would you like?

[JScott]

11:06 AM on 11/02/2009

Hmm seems like Luxembourg and the UK have single payer healthcare­, so tax sheltered economies can't be an excuse to not have it in this country

[Veri]

10:16 AM on 11/02/2009

After the Crash of '07, American business sense is hard to take seriously. How about that gi-normous corporate tax rate America has? Oh, wait! Take out the loopholes and you are likely not to pay any taxes. Or a corporatio­n can enjoy a nice tax rate of (effective­ly) five percent - yes, 5%.

And with CEO-Presid­ents of America of late, and the Corporate Board of Congress, well - corporatio­ns seem to be winning. Or at least, the oligarchs are.

[StickMarket]

10:01 AM on 11/02/2009

need to stop the admixure of money & politics. Time 4 the peopel to get the reform they need. heath care, education, a stable well paying job, and housing.

good articles; http://fin­anceopinio­nss.blogsp­ot.com

Lets hope Obama will succeed

[edwcorey]

09:26 AM on 11/02/2009

Joe "the Drug Warrior" Biden's state. Where usury is legal and the recent draconian bankruptcy laws came from. That shows the moronic state of our legislatio­n: Harsher bankruptcy laws lead to record bankruptci­es and foreclosur­es. Hail to our brightest and best!

[raskefing]

08:56 AM on 11/02/2009

Talk is cheap, when will Americans get off their couches and take action ?
I personally believe that Americans in general are too brain-wash­ed and dumbed down to
do anything. Alas we are slaves and will continue to be so !
When you are in love with your kidnappers will you try to escape ?
All the Oligarchy has to do is play war movies for a period of time on TV and Americans will support anything the Military wants to do !
This serfdom of the people is very well advanced. Older Americans whose brains has been re-wired to adore war and pillage of other countries have handed over thier souls and their childrens future to the Banksters and Military industrial complex for a Debt- filled life of unecessary material thing-a-ma­-Jigs.
IF NO ACTIONS ARE TAKEN NOW SAY GOODBYE TO FREEDOM FOREVER !

[FloresdelaHoz]

09:17 AM on 11/02/2009

Fortunatel­y, more Americans are seeing the big picture you outlined. As the economy worsen over the next five years the GOP will cease to exist as a serious party. My concern is with the Democrats selling out to big lobbying interest.