CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Spreading Prosperity 347
which gets into diplomatic issues, but obliquely, on what keeps them processing
dirty money.
First, the U.S. Patriot Act took shell banks off the table, barring transfers
into the United States from these camouflaged little subterfuges in the
Caribbean, Channel Islands, the Pacific, and elsewhere. Now it’s time to
treat shell corporations, trusts, and foundations in exactly the same way. Entities
that are hidden behind nominee shareholders, directors, and trustees
must be equally off the table. No more transfers to U.S. or European financial
institutions from disguised businesses and bank accounts.
Second, multinational corporations should be discouraged from using
special purpose entities or international business corporations domiciled in
tax havens. Every entity owned or controlled by a multinational corporation,
together with its place of registration, should be listed in the firm’s
published annual report. Enron’s 800 or so Caribbean financial dumps
would have made very interesting reading.
Third, corporations should be required to file reports annually with tax
authorities on the specific business purpose of any entity registered in a tax
haven or secrecy jurisdiction, together with the entity’s physical location and
staff level. You may have a legitimate purpose, but the ball is in your court to
explain it.
The thrust of these points is not aimed at attacking the sovereignty of island
countries and tiny enclaves, thus incurring all sorts of diplomatic
wrath. Instead, we make the secret and tax-evading entities that keep them
in business much less attractive to the users.
Then the huge question is whether corporations should be required to
publish tax returns. If they were, this would cut through many issues surrounding
corporate tax evasion and would exert enormous pressures on corporations
and tax havens to clean up their acts.
The argument is that a company that is chartered by the state, which
belongs to the people, should be accountable to the state and the people.
Furthermore, a corporation that is publicly owned should be publicly transparent,
particularly in assuring that it is abiding by all laws, tax and otherwise,
here and elsewhere, in its dealings.
In response, corporations claim that publishing tax information would
reveal corporate information about where profits are earned and how costs
and revenues are allocated. They want tax subterfuges to remain a competitive
secret.