Why few Americans turned up in the ‘Panama Papers’
Wealthy potentates from several dozen countries have been identified as global tax evaders in the intriguing “Panama Papers” scandal. But one country is almost entirely absent from the files: the United States.
A massive leak of documents from Panamanian law firm Mossack Fonseca shows that more than 100 prominent people have used the firm’s services to set up accounts in foreign tax havens and avoid paying taxes in their home countries. Funneling money to tax havens isn’t necessarily illegal, but the revelations are certainly embarrassing and they show that some public officials seem to have a lot more money than they should.
The top federal income tax rate in the United States is 39.6%, with a threshold of about $415,000 in income for a single filer. In much of Europe, the top rate is a few points higher—but it kicks in at much lower income levels. As for investment income, the capital gains rate in the U.S. is 20%, and 15% on the type of investment known as “carried interest.” In a few investor-friendly European countries—Switzerland, Luxembourg, the Netherlands—the capital gains rate is 0. But in most of Europe it ranges from 15% to 42%. And few countries have as many generous tax deductions as the United States.
Who’s looking for tax havens?
Tax experts generally identify three categories of people who seek global tax havens: criminals; “politically exposed persons,” or PEPs, who enrich themselves while holding office and need to hide the money; and regular rich folk who want to conceal assets from family members, ex-spouses and the like. Many of the characters who turned up in the Panama Papers appear to be PEPs.
Today, individuals who hold over $10,000 in foreign-held banks are required to submit records of their accounts to the IRS each year. Established havens such as Bermuda and the Cayman Islands cater to certain types of businesses and don’t really want to deal with individuals, because it could sully their reputation with corporate clients.
There may be further juicy revelations from Panama, and more Americans might surface in the Mossack Fonseca files.
Original Story at Yahoo Finance.