U.S., Awash In Hypocrisy, Becoming Biggest Offshore Tax Haven

The Foreign Account Tax Compliance Act (FATCA), passed in 2010, is the main shackle that America puts on other countries. It requires financial institutions abroad to report details of their American clients' accounts or face punishing withholding taxes on American-sourced payments. America's central role in global finance means most comply.

FATCA has spawned the Common Reporting Standard (CRS), a transparency initiative overseen by the OECD club of 34 countries that is emerging as a standard for the exchange of data for tax purposes. So far 96 countries, including Switzerland, once favoured by rich taxophobes, have signed up and will soon start swapping information. The OECD is also leading efforts to force multinationals to reveal more about where and how profits are made, and the deals they cut with individual governments, in order to curb aggressive tax-planning.

Because it has signed a host of bilateral data-sharing deals, America sees no need to join the CRS. But its reciprocation is patchy. It passes on names and interest earned, but not account balances; it does not look through the corporate structures that own many bank accounts to reveal the true "beneficial" owner; and data are only shared with countries that meet a host of privacy and technical standards. That excludes many non-European countries.

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[An] investigation, by Die Zeit, a German newspaper, concluded that for the tax cheat looking to pull money out of Switzerland, America was now the safest bet. "It's going nuts. Everyone is doing it or looking into it," says a tax consultant, speaking of the American loophole. Some transfers are being requested for legitimate reasons of confidentiality--for instance, by Venezuelans who fear extortion or kidnap if their wealth is known. But much is of dubious legality.