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By Joe Kirwin
May 11 — The U.S. should be listed as a tax haven if it doesn't take steps to expose beneficial owners of companies and if the OECD's common reporting standard isn't adopted, the European Green Party said.
Released in advance of a European Parliament TAXE committee visit to the U.S. Congress, the May 11 European Green Party report also calls on the EU to adopt sanctions against U.S. banks that don't automatically exchange data with EU member states' tax authorities.
“As a result of its tax regime, the U.S. is getting more and more attractive as a tax haven for the world’s wealthy elite,” Molly Scott Cato, a Green Party member from the U.K., said in a statement.
European finance ministers have unanimously endorsed plans to exchange beneficial ownership registries.
Following the release of the leaked Panama Papers, the European Commission added provisions to an anti-tax avoidance proposal that would extend country-by-country reporting to require companies with business activities in an upcoming tax haven list to provide a breakdown of profits earned and taxes paid in that territory—and to possibly make that data public.
The Green Party report acknowledged that U.S. President Barack Obama recently announced measures to improve financial transparency to identify the true owners of financial accounts and to exchange information of bank account holders with other nations (88 ITM, 5/6/16).
The report called the proposed U.S. changes insufficient because:
The report also noted that even if the U.S. were to commit to the Organization for Economic Cooperation and Development's common reporting standards, current U.S. legal framework “does not allow its financial institutions to collect beneficial ownership information for all relevant cases” covered by the OECD’s global automatic exchange of information standard.
“U.S. financial institutions are currently only required to obtain information on beneficial owners for correspondent banking (i.e. accounts held for foreign financial institutions) and for private banking of non-U.S. clients (accounts holding more than $1 million),” the report said.
The issue of the U.S. as a tax haven has also caused considerable attention among EU member states as they push to adopt the OECD's recommendations to combat base erosion and profit shifting and consider tougher laws to require public registries of beneficial ownership of countries in the wake of the Panama Papers scandal.
The European Commission takes a more reserved approach on the issue of the U.S. and its financial transparency laws than the EU's Green Party, a political party aligned with social justice and environmental policies.
Responding to the issue about states like Delaware and Nevada that don't require beneficial ownership information of companies, a European Commission official said they “are states of the U.S., not independent tax jurisdictions—they will therefore not fall within the scope of the list.”
The official said “just like we have been doing, the U.S. must scrutinize its own tax system and change what needs to be changed to ensure fairer and more transparent taxation at home and globally. We would like the U.S. to come fully on board in the international move towards greater tax transparency by using the new global standard for the automatic exchange of information. This can not be a one-way street.”
The U.S. position is that if Congress agrees to amend the Foreign Account Tax Compliance Act as proposed May 6 by the Obama Administration, the U.S. will be in compliance with the OECD CRS and the “globalization of FATCA as endorsed by the G-20.”
The TAXE Committee, formally the European Parliament's Special Committee on Tax Rulings and Other Measures Similar in Nature or Effect, will meet with Congress on May 17-19.
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The European Green Party report is at http://www.greens-efa.eu/the-role-of-the-united-states-as-a-tax-haven-15525.html.
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