As the world is uniting to tackle tax evasion and improve financial transparency, the US “threatens progress,” a new survey has said. America is now ranked third among the world’s most attractive “tax havens,” trailing only Switzerland and Hong Kong.
The US has jumped from sixth place to third in the Financial Secrecy index, which is prepared by the Tax Justice Network (TJN) every two years. It is estimated that between $21 and $32 trillion worth of private financial wealth resides in so-called tax havens across the globe, where they are untaxed or lightly taxed.
While TJN noted that “most countries’ secrecy scores have improved,” the United States is the “greatest” concern and is “more of a cause” for worry than any other individual country.
“Our analysis also reveals that the United States is the jurisdiction of greatest concern, having made few concessions and posing serious threats to emerging transparency initiatives,” the TJN said in a press release.
The United States is one of the few countries whose secrecy score has worsened since the previous survey in 2013.
“The US stays a tax haven, and undermines global co-operation,” the TJN concluded.
The new ranking may question the effectiveness of the US Foreign Account Tax Compliance Act, or FATCA, that came into force on July 1, 2014.
While European states – most of which were also included in TJN’s new index – have committed to the so-called Common Reporting Standard, or CRS, the Obama administration has laid out its own sets of rules. It also remains “reluctant” to take part in international cooperation and reforms.
“Though the US has been a pioneer in defending itself from foreign secrecy jurisdictions, aggressively taking on the Swiss banking establishment and setting up its technically quite strong Foreign Account Tax Compliance Act (FATCA) – it provides little information in return to other countries, making it a formidable, harmful and irresponsible secrecy jurisdiction at both the Federal and state levels,” the TJN report said.
Authors of the survey criticized “Washington’s independent-minded approach,” warning that it risks “tearing a giant hole” in the world’s efforts to tackle “tax evasion, money laundering and financial crime.”
The US was ranked behind only Switzerland, which traditionally tops the index, and Hong Kong, which the TJN described as “a great and growing concern.”
“Unlike European countries it appears to have little appetite for country-by-country reporting or for creating registers of beneficial ownership,” the report said regarding Hong Kong, blaming China’s control for “shielding” it from global transparency initiatives.
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The UK has also been in the TJN spotlight, as this year it could have “easily” surpassed Switzerland, the “grandfather of the world’s secretive tax havens,” if not for the fact that it wasn’t considered as one entity.
“Had we treated the UK and its dependent territories as a single unit it would easily top the 2015 index,” the report said. Britain came in 15th in the 2015 index.
The TJN’s top ten also included Germany (ranked 8th) and Dubai (ranked 10th).