Obama orders actions against tax loopholes in wake of Panama Papers

US President Barack Obama announced measures Friday to combat tax loopholes exploited by both US and foreign taxpayers, and called on Congress to take further legislative action.

The measures would help federal authorities "do a better job of tracking financial flows and making sure that people are paying the taxes that they owe, rather than using shell corporations and offshore accounts to avoid ... paying their fair share," he said.

Under the new rules announced Friday, US financial institutions will be required "to know, verify and report who the real people are behind shell corporations that set up accounts at those institutions," he said.

In addition, a proposed change in tax rules would make it harder for foreigners to "hide behind anonymous shell companies formed inside the United States."

But further measures are beyond presidential power alone, Obama said.

"Only Congress can fully close the loopholes that wealthy individuals and powerful corporations all too often take advantage of," he said.

"I’ve put forward plans repeatedly to do exactly that - close loopholes, make sure that everybody is paying their fair share, which would not only give people greater confidence in the system, but would be good for our economy."

Earlier, Mossack Fonseca, the law firm at the centre of the so-called Panama Papers leaks, said it wanted to stop the online publication of raw data relating to its business to protect the confidentiality of its clients.

The International Consortium of Investigative Journalists (ICIJ) is set to publish an interactive database Monday on its website that contains details on more than 200,000 shell companies.

Panama-based Mossack Fonseca called on the ICIJ not post the data online.

"[The database] is based on the theft of confidential information and is a violation of the confidentiality agreement between attorney and client, which we must protect," the law firm said in a statement.

The release of the Panama Papers detailing information on numerous politicians, celebrities and sports personalities hiding their assets in shell companies caused a media storm last month.

Mossack Fonseca sees itself as the victim of data theft and has insisted it has always abided by the law.

Obama cited the leaks about tax havens.

"In recent months, we've seen just how big a problem corruption and tax evasion have become around the globe," he said.

"We saw what happened with the release of the Panama Papers, and we've seen the degree to which both legal practices of tax avoidance that are still unfair and bad for the economy, as well as illegal practices that, in some cases, involve nefarious activities continue to exist and to spread."

Congress should pass legislation requiring all companies formed inside the United States to report information about "their real owners" to the Treasury Department, Obama said.

"That's going to help law enforcement better investigate and prevent financial crimes," he said.

He urged the Senate to allow the implementation of long-pending tax treaties.

"We're going to need to cooperate internationally because tax evasion, tax avoidance, money laundering - these things are all taking place in a global financial system," Obama said. "And if we can't cooperate with other countries it makes it harder for us to crack down."

Last update: Sat, 07/05/2016 - 12:53

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