An influential Democratic senator has demanded answers from the IRS about what it has done since the Panama Papers were published last spring to combat tax fraud committed through anonymous shell companies.
Oregon’s Ron Wyden is the top Democrat on the Senate Finance Committee and could become its chairman if Democrats regain control of the chamber in November elections. He sent a three-page letter on Wednesday to Treasury Secretary Jacob Lew and IRS Commissioner John Koskinen, asking for data on required reporting about shell companies.
“It’s critical to determine whether our government has the right tools to discern legitimate businesses from criminal enterprises, and to identify what additional measures might be needed to fight financial crime,” Wyden said in his letter.
The April release of what’s now called the Panama Papers spotlighted how foreign leaders, drug cartels and the wealthy use offshore companies to skirt taxation and law enforcement. Under the umbrella of the International Consortium of Investigative Journalists, more than 300 journalists from McClatchy and other news organizations across the globe examined the leaked database of Panamanian law firm Mossack Fonseca, which showed the true owners of hundreds of secret offshore companies.
Reporting by McClatchy and partners led the Panamanian firm to abandon its U.S. operations in Nevada and Wyoming, states that were being used by foreigners as offshore tax havens much like wealthy Americans flock to havens such as the Cayman Islands and Bahamas.
This spring, news reports surrounding the release of the ‘Panama Papers’ highlighted the opaque dealings of anonymous shell companies around the world.
Sen. Ron Wyden, D-Ore., in an Oct. 19, 2016, letter to IRS Commissioner John Koskinen
Wyden wants answers from the IRS about a special Corporate Fraud Task Force that was created in 2011 by the IRS and the Nevada secretary of state to probe Nevada business entities suspected of involvement in tax evasion, money laundering and other fraudulent and deceptive practices.
The senator asked, “How many business entities were reviewed by the task force? What are the findings of this task force? Did any criminal or civil prosecutions result from the work of the task force?”
An aide on the Senate Finance Committee, who wasn’t authorized to be quoted by name, said the IRS commissioner was provided with two attachments that listed numerous U.S. companies created by Mossack Fonseca. Wyden wants to know how many of them had federal employer identification numbers and how many had actual tax liabilities because of business in the United States.
Wyden is after data that would show whether registered agents, such as Mossack Fonseca, kept records of real contacts for the companies they created. Russian and Brazilian business owners favored Wyoming and Nevada for the secrecy that protected their identities even though they did no actual business in the United States. McClatchy’s reporting showed how, in many cases, it was virtually impossible to know those true owners, and follow-up reporting showed Nevada may not know.
The senator is also pushing back against secretaries of state across the nation who have argued that required federal tax filings give the government the needed information about the true benefactors of a given company. “We’re trying to test how accurate that is. We suspect that it is not an accurate characterization,” said the committee aide.
Despite the many convicted and suspected U.S. financial fraudsters in the Panama Papers, the leak of company formation documents was met largely with a yawn by Congress and the Obama administration. The Panama Papers revelations showed how the offshore world undermines U.S. policy on international sanctions, immigration, drug trafficking and tax enforcement, and was used by financial firms that cheated clients.