Who Needs Panama When We Have Delaware

The recent release of the Panama Papers, the 11.5 million confidential documents exposing the hidden wealth of world leaders, such as Russian President Vladimir Putin and Britain’s Prime Minister David Cameron, has caused little ripple here in the US. Why? Well, who needs Panama when America’s wealthy have Delaware.

States like Delaware and Nevada have long been criticized by transparency advocates for allowing Americans to use them as tax havens. But a recent document leak revealed that such corporation-friendly states may be helping foreign nationals hide potentially illicit assets as well.

Earlier this month, 11.5 million confidential documents were leaked from a Panamanian law firm, exposing how some of the world’s richest people hide assets in shell companies to avoid paying taxes. It’s the largest leak in history, and among the so-called Panama Papers’ many revelations was that the seventh most popular place to set up shell corporations was in Nevada.

More than 1,000 companies have used Nevada to hide their money. Delaware, South Dakota and Wyoming also emerged as popular places to stash cash.

Some of these states actively market themselves as quick and easy places to set up corporations. Take Nevada. Its website points visitors to its WhyNevada.Com to find out “why NV ranks as a top state for commercial filings,” highlighting its favorable tax structure. Meanwhile, Delaware’s most recent financial report touted another record year for the number of new entities registered in the state. Delaware’s 1.1 million registered corporations outnumber the people who actually live there.

The Panama Papers have raised concerns among many here who say it’s hypocritical of the U.S. to complain about its citizens hiding assets from taxation in offshore accounts when some states provide the same service for foreigners. The secrecy these states offer to account holders also brings up questions about whether money is intended for or came from illegal activity. “Drug money, funding terrorism — we know all of these uses exist in shell corporations,” said Matthew Gardner, the executive director of the Institute on Taxation and Economic Policy (ITEP), a nonpartisan think tank that works on state and federal tax policy issues

It’s apparent that it’s really easy to set up one of these shell corporations, even for your cat.

H/t to Frances Langum at Crooks and Liars