WashU Expert: The President’s plan to fight tax evasion

President Barack Obama recently introduced executive reforms to eliminate loopholes that allow foreigners to conceal tax evasion in the United States. Olin Business School's Lamar Pierce says the move is an effort to prove America is willing to practice what it preaches when it comes to preventing tax fraud.

On May 6, President Barack Obama introduced executive reforms designed to eliminate loopholes that allow foreigners to conceal tax fraud and evasion in the United States. They include a new U.S. Department of the Treasury rule that that will force banks and investment companies to report the actual owners of the companies they serve.

The crackdown comes after the recent release of the so-called “Panama Papers,” a data dump revealing the offshore accounts and shell corporations secretly held by thousands of politicians, business leaders and public figures in an attempt to hide assets.

Pierce
Pierce

Lamar Pierce, associate professor of organization and strategy at Washington University in St. Louis’ Olin Business School, said the move is an effort to show U.S. global partners that it is ready to practice what it preaches when it comes to curbing shadowy financial transactions.

“As the U.S. puts more emphasis on pressuring other countries to help enforce U.S. tax law, it must show some reciprocation in closing some of the state-level loopholes that allow those countries’ citizens to evade taxes and launder money,” Pierce said. “The difficulty in doing so is that several states (such as Delaware) that profit from banking secrecy will vehemently oppose ownership transparency mandates at the federal level.”

Forcing banks to become more transparent, both in this country and around the world, also could help reduce criminal activity on a sweeping, global scale.

“Banking secrecy not only facilitates tax evasion, but also provides the financial services for many globally costly criminal enterprises, including illicit drugs, arms, organized crime and government corruption,” Pierce said. “Lubricating the financial system for such enterprises has much broader implications for political and economic stability across the world that certainly concerns the U.S. Government.”

Pierce is available for interviews and may be reached at pierce@wustl.edu.

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