Delaware: International Tax Haven
Delaware has been named the most secretive financial jurisdiction, even more secretive than Switzerland. I guess some day we’ll be talking about Delaware bank accounts:
The United States, led by the eastern seaboard state, took in $2.6 trillion in deposits from non-resident corporations and individuals in 2007, according to a survey of financial jurisdictions analyzed by the Tax Justice Network.
[…]
The ranking is based on a composite of total offshore activity and measures such as whether a jurisdiction obtains beneficial ownership information about companies and the degree of cooperation in turning over requested financial information.
Delaware is attractive because it does not tax profits realized outside the state and does not require companies to be physically present, according to the Tax Justice Network.
UBS and Credit Suisse have about 200 entities in the state, according to the group.
There are nearly 700,000 active entities registered in Delaware — and about half of those publicly traded in the United States, according to the group.
I think the question we need to ask is whether this benefits the citizens of Delaware? Are Delaware’s citizens getting benefits out of being a tax haven? ING just announced they were leaving the state and most of these corporations are registering here without having a physical presence. Personally, I’d rather see corporations like Fisker in the state then some shell company that is transferring money back and forth.
Tags: Banking Industry, Delaware
This is a screwy article, in many ways.
1. Delaware is not a “tax haven,” nor does it have the secrecy that has brought Switzerland into disrepute. All dividends and interest from Delaware corporations are subject to U.S. income tax and reportable as such, just like corporations in all other juridisdictions.
2. Delaware “does not require corporations to be physically present.” Neither does any other state.
3. Delaware “does not tax profits realized outside the state.” Nor should it. Instead, it collects a hefty franchise tax from large corporations, and a nice annual fee from small ones. Large corporations which actually do business here pay a robust 8.7 percent tax on their net profits from Delaware operations.
4. This ranking is not based on actual tax avoidance but on “whether a jurisdiction obtains beneficial ownership information about companies” – in other words, whether you and I can go to delaware.gov and learn the owners of any corporation, partnership or LLC registered in Delaware. As Prof. Larry Hamermesh notes, this is not done in the U.S.
5. From the original article: “‘While the U.S. has been jumping up and down and saying ‘Aha, bad, wicked Swiss banks,’ the U.S. is doing exactly the same things as far as non-resident bank account holders,'” said Sarah Lewis, executive director of the group, based in the U.K.” This is nuts. All U.S. banks report all interest payments [exceeding $10 in any year] to the IRS. If the account is held by a foreigner, the information is likely to be shared with the foreigner’s home country, under the tax treaties with most U.S. trading partners.
How does this benefit the citizens of Delaware? It means that we pay just 70 percent of the cost of state government. It means that businesses throughout the country are funding our schools, roads and social services.
A note to liberals.
If you want less of something, tax it.
If you want more of it, tax less.
People respond to incentives.
Mike Protack
If you want less of something, tax it. If you want more of it, tax less.
More stupid platitudes.
Investment taxes are at an all-time low. Where is all the investment?
Mr. Shallow Bench provides shallow thoughts. It is astounding that he is allowed to fly planes.
And now the Pornstache is running for NCCo Council. Let the good times roll. Wonder if he can possibly lose a GOP-leaning seat.
Delaware’s 3 billion dollar budget includes a billion dollars from corporations and abandoned property. Imagine trying to carry that additional cost in a budget year.
We need to diversify our sources of revenue. Relying on absentee corporations sounds like a recipe for disaster. We’re just waiting for some other state to loosen their rules more than ours. Isn’t that what happened with the credit card industry?
No, UI. States have been trying to copy Delaware’s corporate law for years, without attracting any significant business. Reason: Delaware’s judiciary. Other states are stuck with elected judges, while Delaware has the Court of Chancery, an internationally respected arbiter of corporate, commercial and trust disputes.
And now the Pornstache is running for NCCo Council. Let the good times roll. Wonder if he can possibly lose a GOP-leaning seat.
Dang it…was this announced and I missed it? I’ve been sitting on this one for a couple of weeks, trying to vet his personal Judas’ for confirmation. Then again, they were the same ones who told me about his attempt to get nominated for State Party leadership from the floor of the convention and we all saw how that worked out. Bastards. Alas, ’tis why I was sitting on it, trying to see if it had a pulse.
Funny, but not surprising thing is, now that he supposedly has set his sights on NCCo (something people have been suggesting for eons to deaf ears), he has done so in a period that there is likely going to be someone else throwing a hat in the ring. I think he’s addicted to primaries.
I think one of our wingnut anon commenters said something about this last week. If it’s true, then, hey — let the good times roll! Every bit of idiocy this fool has ever uttered is searchable on this website.
That is a very strange article — I can only imagine what the actual “study” from the UK they reference looks like. In many ways, it looks like someone trying to deflect the hits that Swiss banks have taken recently re: their secrecy. Although the secrecy that they are under fire for is that which allows Americans to hide funds from Uncle Sam. I don’t think that there is anything about Delaware’s corporate setup that encourages being a tax scofflaw, but I could be wrong about that.
Good question, Cassandra, and it’s important for all of us to understand that the answer is no.
JM is right all around. I would add that we would need to double our income tax without the boost from the franchise tax and unclaimed funds that they hold.
I agree Smitty, I can’t believe MJ broke the Protack news. I knew it for a while as well. I guess I can go public now.
U. I. We have a diverse revenue stream. That is the point of this. We are not dependent just on the local economy where 70% of our revenue is generated. When our local economy comes back, that percentage will fall because other sources will increase instead of decline in dollar amount. Gaming will be a bust with PA going into slots and table games and the court hampering sports betting. There are very few easy revenue sources left.
We just have to grow the economy. Okaying the dredging and doing a small tax on freight would actually be easy, but you libs would rather tax the working man than get an easy 100m that actually boosts the regional economy.
Ron Williams broke the Pornstache “news” in his column yesterday.
The first time I saw the news about Protack’s run for County Council was on this website, in a comment by lizard on October 30.
I forward John Manifold’s comments to John Christensen, director of the Tax Justice Network in London, and one of the authors of these rankings.
I was curious what John Christensen would say in rebuttal.
Here’s the reply J. Christensen just emailed to me:
“The index is not ranking tax havens. It ranks financial secrecy. It ranks the USA top of the index, and identifies Delaware as a state of particular concern because of the lack of transparency on corporate ownership and accounts. Delaware is not alone in this respect, but it is a major centre for incorporation.
The USA does not have effective tax information exchange treaties with the majority of countries.”
I’m not sure John Christensen effectively replied to all of John Manifold’s points (of course, Christensen finds himself besieged with emails today from all over the world!), but the overall rebuttal seems to suggest that if the USA doesn’t effectively convey income and tax details to other countries because of the lack of “effective tax information exchange treaties with the majority of countries”, Delaware – by virtue of its position – rises to the top of the heap!
I hope to interview Christensen or someone else from his organization during a segment of my Noon news hour today!
Allan Loudell
1150 A.M.—WDEL Radio & http://www.wdel.com
To paraphrase Leona Helmsley, only Democrats pay taxes:
http://apps.detnews.com/apps/blogs/taxingdetroitblog/index.php?blogid=172