
Panama Papers Reveal How Wealthy Americans Hid Millions Overseas - hvo
http://www.nytimes.com/2016/06/06/us/panama-papers.html?hp&action=click&pgtype=Homepage&clickSource=story-heading&module=first-column-region&region=top-news&WT.nav=top-news&_r=0
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matt_wulfeck
I really believe the best way to combat tax evasion is to make the tax process
easier, more efficient, and less burdensome, especially to wealthy earners.

It is _insane_ the amount of work that I put into my taxes each year, only
because we have a small business and doing things right versus doing things
wrong is a difference in the tens of thousands of dollars. The extraordinary
amount of loopholes and special interests means you need experts. And as I've
said before here, the current tax system exist in the interest and benefit of
large companies, not small companies or individuals.

If we instituted an overnight 9%, 9%, 9% "Simcity Tax" system and eliminated
the massive tax loopholes that exist in all levels of the tax code, then I
guarantee that money would come _pouring_ back into the United States.

~~~
Negative1
No offense to you but that is absolute and utter bullshit. The tax process
being exploited has nothing to do with it being inefficient and burdensome. It
is in fact that way to obfuscate the external influences that incorporated all
the loopholes that very well trained attorneys that only the wealthy can
afford are incentivized to take advantage of.

Your 'institute my idea and it will fix everything I promise' idea has
basically been why many Presidents have been elected and yet nothing has
really improved.

The problem is not simple but the root is; while the wealthy can influence the
process of how much they pay in taxes, the system will continue to be in their
favor. How do we fix that? Damned if I know.

~~~
um_ya
You don't need to be a millionaire to use these tax loopholes. I calculated
that it would take $2600 a year to maintain an offshore structure. That
includes an offshore LLC and trust in Belize (the best jurisdiction). The
Belize trust owns membership position in your Belize LLC, and your Belize LLC
has control over the trust. Then you just appoint yourself as manager of the
LLC. Once that's done, you can simply open bank accounts or brokerage accounts
in the LLC name.

~~~
charlesdm
You can set up the structure, but you won't be able to defend it in court
without bankrupting yourself when the IRS comes knocking. And that's exactly
where the problem lies.

~~~
danieltillett
Exactly. It does not matter how clever your structure is if the IRS thinks it
is fishy you are going to be in for a world of pain.

~~~
rbcgerard
Which makes it particularly painful if you're innocent

~~~
danieltillett
Of course. I am an Australian living in Australia with no direct US business
and the IRS is a pain for me to deal with. I don’t know how US citizens and
businesses manage it.

~~~
sbmassey
The US IRS? What do they demand of you?

~~~
danieltillett
Yes the US IRS with things like W8-BEN-E form when you sell to a US company.

They also make it more of a pain to deal with financial institutions since the
institution needs to ensure you are not a US citizen.

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matt_wulfeck
I haven't read through the list, but I'm guessing the bulk of the names on
here aren't very exciting. Our society is so litigious that it's in your
absolute best interest not to let anyone else see your cards. This is
especially true if you're a doctor or famous person.

I realize that this statement may be controversial, but I hope it's at least
not very surprising.

~~~
rayiner
> This is especially true if you're a doctor

Doctors hiding assets to insulate themselves from largely-meritorious
malpractice lawsuits,[1] would be pretty interesting.

[1] [http://archive.sph.harvard.edu/press-
releases/2006-releases/...](http://archive.sph.harvard.edu/press-
releases/2006-releases/press05102006.html)

~~~
Thriptic
Most have malpractice insurance anyway

~~~
rayiner
It would probably be simpler to provide patents with insurance against medical
malpractice.

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danieltillett
If you really want to prevent tax evasion then start taxing assets. You can’t
really hide assets (excluding a few minor ones like diamonds, but these are a
tiny fraction of all assets).

If you tax assets like land, shares, buildings, mines, vehicles, bank
accounts, gold, etc, then evasion is not possible and the useless wealthy that
inherited (rather than created) the assets will start paying tax.

~~~
dredmorbius
Show me a breakdown of total US wealth by _asset_ class.

I suspect much of that's going to be in intermediate or structured classes, to
wit: corporate structures. Not merely land / building / plant / stock, but
corporate entities themselves.

But seeing that spelled out might suggest the feasibility of your suggestion.
It _is_ interesting.

~~~
danieltillett
You can of course tax shares just like any other asset. Anything that can’t be
hidden can be taxed :)

Don’t quote me on this, but as far as I am aware the major asset class in the
USA is land and improvements. Rather hard to hide either of these :)

~~~
dredmorbius
I'm specifically interested in the breakdown. David Brin has been noodling
along these lines for a while as well.

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darawk
40-70 billion is the estimate of tax revenue losses from this sort of thing?
Does that strike anyone else as insanely low? You're telling me that the sum
of all tax losses due to evasion is just equal to the net worth of our
wealthiest private individuals?

~~~
charlesdm
Why would you bother going offshore if capital gains are taxed very low in
most countries? For example, wealthy heirs can live their entire life, not
paying a cent of income tax. Life is good if you can earn money by just
booking capital gains.

Should the capital gains tax rate be higher, i.e. 50%, I dare bet the numbers
would be a lot higher. Higher rates act as an incentive to avoid.

~~~
darawk
I think the main reason would be the estate tax. That's a huge, huge cost for
inherited wealth. Maybe there is some way around that that doesn't involve
offshoring, but that seems like a pretty big reason to me.

~~~
daveguy
I wouldn't call it a huge, huge cost. In the US it is the equivalent of being
in the higher tax bracket on the portion that falls above the exclusion
amount. If the value of the estate is $5.45 million or less then you pay zero
in estate taxes. ZERO. Only the top 0.2% of estates pay any estate taxes and
that is only on the value above the exclusion amount ($5.45 million).

~~~
darawk
Ya I was talking specifically about for high-net worth individuals, though. If
you are worth 100 million, you're paying ~50 million in tax when you die.
That's certainly worth sheltering.

~~~
daveguy
or ~37.8 million, but ya. If your net worth is 100 million your kids should
definitely get 100 million instead of 62 million. They practically earned it
and definitely deserve it for being your kids. You wouldn't want them to wind
up destitute.

Tell me this. If you hired your kids for a year and paid them 100 million
dollars to do the job of being your kids how much would they pay in taxes? The
answer is about $40 million. In the US _transfer of wealth is taxed_ whether
its salary or just for the sake of little Johnny. Loopholes should be closed
(if they were even legal loopholes to begin with).

~~~
darawk
? You're arguing against something I didn't say. I wasn't saying they _should_
shelter it, or that they deserve to keep it. I'm saying that they're strongly
incentivized to, so it makes sense that many of them would attempt it.

~~~
daveguy
+2 it's a good point. Closing loopholes and enforcing large fines should help
disincentivize the sheltering. If the loopholes are legal, just closing them
will help tremendously. I am sure that "legally save me as much money as
possible" is a common phrase heard by CPAs.

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euske
So, these companies are basically the Tor router of money.

Recently NPR Planet Money also covered a related topic which was very
entertaining.
[http://www.npr.org/sections/money/2016/05/27/479717380/episo...](http://www.npr.org/sections/money/2016/05/27/479717380/episode-703-how-
to-hide-a-million-dollars-in-plain-sight)

~~~
alexandercrohde
The interesting thing, in my opinion, is that all large wires are tracked by
our government. We'd do much better to use all of this monitoring
infrastructure to stop tax-evaders instead of searching for more terrorists .

~~~
herbst
In a way you guys do. AFAIK the only reason U.S. people have no fully private
banking accounts more in Switzerland is because the country also provides us
with Secret Intelligence information about who knows what.

AFAIK no other country got that deal so far, for anyone else in the world
Switzerland still provides private banking accounts.

------
coldcode
One good way to improve taxation is to allow the IRS to modernize and
streamline their ability to collect the taxes owed. Every year 100+ Billion is
lost due to their inability to adequately collect taxes. Yet congress
continues to kill their budget for political reasons and so they can't have
enough resources to go after the politician's best buddies. Of course this
would assume competence at the IRS to spend it correctly, a good question. But
hamstringing the people who bring in all the revenue so you have to borrow
even more is pretty dumb.

~~~
danieltillett
You do know this is a feature not a bug.

------
rbcgerard
I find it interesting that the general sentiment on HN seems to be that
individuals should have freedom from government intrusion into their
communications - but that doesn't seem to translate into the same feelings
regarding their financial transactions.

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vasilipupkin
Ponsoldt family appears to be exceedingly dumb, based on this article

~~~
xufi
Lionel Messi (the world famous soccer star) also appears on it. So does Emma
Watson from the Harry Potter. I did find the list had some interesting folks I
wouldn't suspect to be on it

~~~
afarrell
Emma Watson claims that this was to shield the details of her private
residence from the public due to threats against her. I don't see a reason to
doubt her.

~~~
undersuit
I'll just say that it's a pretty flimsy defense of her address... and now the
address is public anyways.

------
jondubois
I think domestic tax policy is fine. International tax policy is a mess.
Currently, every country has a tax treaty with pretty much every other country
- This means that the number of unique international tax treaties is O(n^2) -
So if you consider 100 countries which all have treaties with one anther, that
represents maybe 10000 unique treaties (if you consider each direction as a
separate treaty)... And each treaty is like 50 pages. That's a LOT of work -
It is very easy to make mistakes or introduce intentional loopholes without
being noticed.

If we had a computer program with 1 million pages' worth of code (with no
source control and a highly fragmented Q/A process) then your chance of your
program being buggy is extremely high.

It's baffling that governments thought that it would be better to write up n^2
unique treaties between each other instead of having a single treaty (or
limited set of treaties) that applies to all (a la Kyoto Protocol or Geneva
Conventions)! This is such an obviously bad idea, one has to think that it was
done intentionally... Probably the result of heavy corporate lobbying.

At least now some middle-class workers are able to benefit from this mess
(before remote work was possible, pretty much only corporations and wealthy
people could leverage this). I've heard about regular working-class people who
live in Malta and work remotely for US companies and pay almost no tax - This
is because of loopholes in that specific treaty. There must be loopholes all
over the place.

Right now the system is biased towards helping accountants make big bucks.

------
ianai
Has there been any indication that any of this will lead to audits? The last
interview I saw related to this was someone from the IRS. He said they're far
from having reached diminishing returns on hiring more auditors vs increased
tax revenue. They're simply not that interested in getting every dollar they
can (paraphrasing his words). I LONG to be wrong and would like these papers
to have consequences.

~~~
zrail
IRS is just a bunch of people who want to do their jobs as best they can.
Congress is the entity responsible for not funding IRS. IIRC I saw some
Congressional testimony from the head of IRS a few years ago effectively
begging for more money, because every dollar spent on audits and enforcement
returns ~$10 to the Treasury.

------
cletus
As a non-US citizen living in the US, I'll be one of the first to criticize
the US tax code, particularly for the onerous provisions it places on non-US
citizens and US citizens living overseas (the latter is an honour it shares
with Eretria and maybe one other country)

It's also true that the US tax code makes it pretty easy fodr the rich to
legally avoid taxes. A good example of this is the carried interest tax
credit, staunchly defended by the senior Senator rom Wall STreet (Chuch
Schumer, "Democrat"). Only when making a bid for the presidency did Clinton
jump on the bandwagon of repealing it.

But I have to give the US some credit here. The US is really the only one who
is pursuing tax evaders. A notable example of this is pursuing Swiss banks. If
you read some of the details of what these banks did, it goes way beyond
avoidance and was clearly criminal behaviour that includes vague language to
avoid culpability in discovery of communications, hand delivering debit cards
full of cash without names and so on [1].

Some people like to criticize the US government for going after corporations
for foreign income (the US being an exception in this regard). But really
what's happening is companies are (ab)using transfer (mis)pricing, which in
many jurisdictions is illegal.

What really bothers me is it seems like this idea has set in amongst wealthy
individuals that their supposed philanthropic efforts cover their debt to
society and that they don't need to pay any taxes at all. This is rationalized
in various ways. The government is wasteful (true; can we cancel the JSF
already?). Private philanthropy is more effective than public welfare. Also
true but the rich aren't being philanthropic to pay more taxes or even the
same amount of tax.

Honestly I think much of this "philanthropy" is thinly veiled social exclusion
(you're not rubbing elbows with the unwashed masses at a dinner that's $30,000
a plate) and bragging, essentially.

Taxes pay for public infrastructure. That infrastructure and the political
stability its tied to is an essential element in wealth creation. Most of
these wealthy people owe their wealth to the very country they now seek to
short-change.

As much as people like the criticize the robber barons (etc) of the 19th
century (and into the 20th). The Astors, Rockefellers, Vanderbilts, Carnegies
and so on. These people had their failings for sure but they also contributed,
not to mention the legacy they left behind (turning the US from an agrarian
backwater to an industrial superpower in the span of a century).

There's so much wealth now that's simply inherited, providing next to no value
to society.

People usually say you become more (politically) conservative as you get
older. Honestly I think I'm becoming more socialist.

Here's an example: owners of apartments in NYC pay a disproportionate amount
of property tax. Single family home dwellers pay a much lower rate as these
are the bulk of the voters. It's not quite as bad as Prop 13 in CA but it's
not far off.

At the other end of the spectrum we have these super-luxury condos where a
$100m condo (of which there are now several) pay taxes as if they were worth
$15m. This heralds from the days of Bloomberg who argued that you can improve
NYC by attracting the billionaires [2].

But honestly what does undertaxing billionaires who come here a few days a
year do for the city really?

Historically war and revolution have been the ultimate redistributors of
wealth. There's a reason Caesar's descendants don't own half the world. I
think we can all agree that we don't want that but the current trend towards
hiding wealth offshores and the bankers as willing criminal accomplices has to
eventually give. The roads, bridges, police forces, military and so on don't
pay for themselves.

[1]:
[http://www.ft.com/cms/s/0/2acaa1cc-d6fd-11e4-97c3-00144feab7...](http://www.ft.com/cms/s/0/2acaa1cc-d6fd-11e4-97c3-00144feab7de.html)

[2]: [http://www.nytimes.com/2015/02/08/nyregion/stream-of-
foreign...](http://www.nytimes.com/2015/02/08/nyregion/stream-of-foreign-
wealth-flows-to-time-warner-condos.html)

------
forrestthewoods
Only millions? That's not so bad!

> officials estimate that the government loses between $40 billion and $70
> billion a year in unpaid taxes on offshore holdings.

I wonder how much the government loses out on per year in evasion. Not legal
avoidance (Apple, Google, Microsft, etc) but illegal evasion.

~~~
wonkaWonka
1,000 times one million is a billion, is it not?

From the article:

    
    
        Mossack Fonseca also had at least 2,400 
        United States-based clients over the past 
        decade, and set up at least 2,800 companies 
        on their behalf in the British Virgin Islands, 
        Panama, the Seychelles and other jurisdictions 
        that specialize in helping hide wealth.
    

Also:

[http://www.nytimes.com/2016/04/06/opinion/the-panama-
papers-...](http://www.nytimes.com/2016/04/06/opinion/the-panama-papers-
sprawling-web-of-corruption.html)

    
    
      > With more than 14,000 clients around the 
        world and more than 214,000 offshore 
        entities involved, Mossack Fonseca, the 
        Panama-based law firm whose internal documents 
        were exposed, piously insists it violated 
        no laws or ethics.

------
astronautjones
The part where Mrs. Powers is rambling about the coming Obamapocalypse where
he will devalue the dollar and return to the gold standard is staggeringly
idiotic.

------
honkhonkpants
Why don't the "nominees" of these fake account just move the funds and
disappear?

~~~
mullen
Because they like living in the United States.

That sounds really silly, but there are a number of cases of overseas tax
cheats who get caught then have the opportunity to flee before the tax man
gets them, but they admit their guilt and pay the fines. A lot of them simply
don't want to flee the United States and go live somewhere else.

~~~
a_small_island
I think OP is referring to the employees of the law firm that are setting up
these trusts

------
known
What's wrong in it when Govt does the same?
[http://www.bloomberg.com/news/features/2016-05-30/the-
untold...](http://www.bloomberg.com/news/features/2016-05-30/the-untold-story-
behind-saudi-arabia-s-41-year-u-s-debt-secret)
[http://paste.ubuntu.com/16869423/](http://paste.ubuntu.com/16869423/)

------
jerryhuang100
The IRS and DOT should start scrutinizing the foreign shell companies buying
up properties in major US cities (NYC, SF, LA...), which contribute to the
pushing up the real estate price. Otherwise those shell companies would still
be popular among international tax evaders of ultra riches while average
citizens paying the prices such as high housing costs.

For some reason the quote "The chamber (of secrets) has been opened. Enemies
of the heir ... beware" fro Harry Potter just came up to me.

