Admist of all the revelations from the massive documents leak known as the Panama Papers, perhaps one of the more interesting pieces of information so far is the absence of Americans. More than 214,000 offshore entities connected to people in over 200 countries and territories have been released, and still, the list includes no prominent American figure. It is highly doubtful that all American millionaires are morally just, and that they maintain no hidden offshore accounts. So how do you make sense of this situation?
It is still early to jump to any conclusions. The leak contains approximately 11 million documents which will take a good while to scour through. It is unlikely that the series of American individuals are waiting to be discovered at the bottom of the pile however. All the same time, it’s possible that rich and powerful U.S. individuals engage in a similar practice, but just not through offshore accounts, which the law firm Mossack Fonseca specializes in. After all, we live in a tax haven.
To be clear, creating offshore corporations and other offshore vehicles are not illegal. When those entities facilitate fraud, money laundering, and theft, the practice becomes illegal. For a number of benefits, individuals and organizations incorporate offshore companies. Most notably, it has been used to maintain anonymity in conducting sensitive business and political activities such as a land purchase or political donation. The preferential tax treatment offered to incorporating in specific states also encourage the practice. For those said purposes, offshore companies are a sound, legitimate, business decision. Therefore, to demean all names included in the leaked documents would be a hasty conclusion in need of reevaluation.
Financial transparency advocacy groups claim that within the U.S. soil, Nevada, Wyoming, and Delaware are three states that are equal or even better substitutes to infamous offshore tax havens like Bermuda, Panama, or The Cayman Islands. According to the British-based Tax Justice Network, the United States ranked as the third most popular tax haven, only behind Switzerland and Hong Kong. Panama finds itself at the 13th place. The Guardian further reports Delaware currently houses more than one million companies who enjoyed a share of a $9.5 billion tax reduction. Setting up a company in Delaware is also quick, easy, and relatively inexpensive- as easy, if not easier than an obtaining a library card. After the Panama Papers incident, the number of shell companies incorporated in the U.S. is expected to grow for the apparent benefits and tougher protection of beneficiaries.
Anyone devious to game the system for personal gains, the blame should be on the individual rather than the system itself. A growing presumption of guilt for an honest use of an offshore company should be discouraged. An offshore company may still offer real values to individuals and corporations specifically searching for anonymity and preferential tax treatment. With the proper guidance from tax experts such as CPAs and tax attorneys, incorporating an offshore company could provide benefits well within the boundaries of the law. Instead of overlooking the practice entirely, anyone considering should first properly evaluate the purpose of an offshore company and consult with experts of the viability of the option.
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