Appleby Global Group Services Limited is a very old law firm with a very old mission – helping wealthy people and corporations avoid scrutiny. Beginning on Sunday, the International Consortium of Investigative Journalists began releasing findings from a trove of 13.4m documents from Appleby and its subsidiaries. The media has dubbed these the “Paradise Papers”, and they are deeply troubling.
To carry out its mission for its elite clients, Appleby plays a complicated shell game with carefully crafted tax havens. Here’s a simplified version of its playbook: find jurisdictions with low taxes and lax incorporation laws, set up anonymous shell corporations, and run money through untraceable bank accounts. Sounds dodgy, but it is completely legal.
When the client is a large multinational corporation, this can involve an international web of dummy corporations, taking intangible property – such as patents and trademarks – on an imaginary round the world trip to stay one step ahead of the IRS and other tax authorities.
The game keeps money tucked away from the lawful review of tax authorities, the prying eyes of journalists, or the threatening reach of law enforcement. The result is an astounding windfall for the biggest corporations and the wealthiest individuals. And numerous news outlets have revealed the stunning totals of sheltered wealth belonging to Appleby’s 31,000 American clients, some of them large political donors.
The New York Times’s review of the Paradise Papers reveals that Apple stashed upwards of $128bn in profits offshore by exploiting tax law in the English Channel island of Jersey, which has no corporate income tax. NBC reports that, despite his ethics pledges and financial disclosures, commerce secretary Wilbur Ross kept a stake in a shipping venture with ties to a Russian energy company, which happens to be owned by the son-in-law of Russian president Vladimir Putin.
What should Congress do about an international law firm and the powerful people it represents? The answer is quite a bit.
We can start by enacting tax policy that makes it harder for corporate goliaths and the ultra-wealthy to dodge taxes by sending jobs and assets overseas. The typical American family can’t set up their own Grand Cayman subsidiary, so they’re left paying a bigger share of taxes. That’s unfair, and Congress can level the playing field by passing the Stop Tax Haven Abuse Act, which Congressman Lloyd Doggett and I introduced earlier this year to help to close some of the main avenues for corporate tax dodgers.
Our bill would discourage “inversions” – where large corporations dodge US taxes by merging with a smaller foreign firm. It would block corporations’ trick of deferring taxes on profits to the future, while writing off now the expenses incurred to produce the profits. And it would deem corporations worth $50m or more and managed and controlled in America to be US taxpayers.
I’ve also introduced legislation with Senator Chuck Grassley to tackle the shell corporations that mask the kind of mischief exposed in the Paradise Papers. The bipartisan TITLE (True Incorporation Transparency for Law Enforcement) Actwould require our states to keep track of the real owners of corporations formed under their laws, and make that information available to law enforcement. It would also extend due diligence requirements, like the ones currently in place for financial institutions, to lawyers, accountants, and other professionals who set up shell corporations for clients at firms like Appleby.
America is now a top target for corrupt officials, tax cheats, drug traffickers, terrorists and criminals looking to set up shell companies to hide assets and obscure illegality. Our law enforcement community has made it clear they need authority to find out who is behind shell corporations established on our shores, which play a central role in the kind of schemes Appleby concocts.
As former acting attorney general Sally Yates testified before the Senate judiciary committee in May, “we’re actually lagging behind other countries in the world” in helping law enforcement track the criminals behind shell corporations.
Allowing authorities to follow the flow of ill-gotten gains will make it much harder for international tax cheats, Russian kleptocrats and foreign drug dealers to carry on their schemes. That’s why the TITLE Act has won the support of the National Association of Attorneys General, the Fraternal Order of Police, the Federal Law Enforcement Officers Association, and the National Association of Assistant United States Attorneys.
The Paradise Papers ought to be a wake-up call. We need to shut down tax havens and bring jobs and earnings back to our shores. And we need to stop making it easy for the likes of Vladimir Putin and other corrupt oligarchs to stash money here using shell corporations.
In 1630, John Winthrop told his fellow American settlers that: “We must always consider that we shall be as a city upon a hill – the eyes of all people are upon us.” But the list of American corporations and billionaires littered throughout the Paradise Papers calls our commitment to good governance into question. To uphold our American status as a beacon of justice, Congress must act.
