PANA committee meets Elise Bean in Washington

The European Parliament’s Panama Papers inquiry committee (PANA) met with Elise Bean, former chief counsel of the US Senate’s Permanent Subcommittee on Investigations, in Washington on March 21 as part of the committee’s fact-finding mission to the US. Bean, now a member of the Independent Commission for the Reform of International Corporate Taxation, previously visited Brussels to address the PANA committee in October last year.

A delegation of nine MEPs, including Irish GUE/NGL MEP Matt Carthy, visited the US from March 21-24 and met with US government officials from Treasury and the IRS; Congressmen and Congresswomen and Senators from the House Ways and Means committee, the Senate Committee on Finance, and others. The group also met with Delaware state lawmakers and officials, and the director of the ICIJ, Gerard Ryle.

Addressing MEPs in Washington, Bean said the leadership vacuum on tax issues internationally caused by the new US administration meant the EU’s leadership role was more important than ever.

Trump and tax reform

“Tax reform in the US is in chaos, along with other proposed reforms,” Bean said. “The planned repeal of the Affordable Healthcare Act is described as a healthcare bill, but it’s a tax cut bill which would cut taxes for high-income households by $600 billion.

“The proposed Border Adjustment Tax (BAT) is a huge gamble – supposed to fill the trillion-dollar hole in the budget.

“It’s unclear how the border adjustment tax will proceed because important forces such as the Koch brothers – on behalf of the big oil companies – and retailers like Walmart are dead-set against it.

“A lot of people think the dollar won’t rise quickly if the BAT is introduced. But if it does, then it will create a debt crisis in countries around the world who have their debt in US dollars, and whole economies will crash and burn.

“The House is fixated on the BAT because it doesn’t want to end deferral. But it faces a lot of opposition in the Senate.”

“There is no bill in sight on infrastructure,” Bean continued.

“John Delaney (Democrat, Maryland) has proposed a bill in recent years to fund infrastructure by repatriating corporate taxes, but at a very low rate of 8.75%. A lot of Democrats aren’t happy with the bill because the rate is so low.

“The Trump budget actually slashes infrastructure funding, and faces both House and Senate opposition. It has prompted a lot of thinking about alternatives, and it’s estimated that the immediate end of deferral of corporate taxes could raise between $600bn and $1 trillion.”

Bean said that Senator Ron Wyden, a Democrat from Oregon, had also proposed a bill to end deferral for US corporations on paying tax on foreign profits.

“Wyden has also requested information from the IRS on the US shell companies that appear in the Panama Papers,” she said.

Bean said the new administration was still in the process of making appointments, leading to a chaotic situation in the Treasury and other departments.

“There is nobody in Treasury yet, apart from the secretary (former Goldman Sachs banker) Steve Mnuchin. Steve Bannon wants to deconstruct the administrative state, and the transition team led by Chris Christie has been thrown out.

“The term of IRS Commissioner John Koskinen will end in November, and we’ve no idea who will replace him. He led raids on Caterpillar three weeks ago as the company was accused of improperly shifting billions in profits to Switzerland and then sneaking the money back into the US through false loans.

“So far there is no sign of efforts to repeal either country-by-country reporting (CBCR) or the Foreign Account Tax Compliance Act (FATCA), though Republican Senator Rand Paul tried this two or three times during the former administration.

“On CBCR, the EU have had banks report publicly for a while – so a very important message you should convey to our tax team in the US is that it’s working.

“On FATCA, reciprocity is not going to be a winning argument with this administration. In my opinion if FATCA was reopened at this stage to include the extra elements of the Common Reporting Standard (CRS), it would result in the repeal of FATCA.”

Beneficial ownership in the US

Bean discussed the struggle to gather beneficial ownership information in the US.

“In relation to shell companies, it’s been revealed that Trump’s appointment to head the Securities and Exchange Commission (SEC), Jay Clayton, is the hidden owner of CSC, the largest corporation dealing with company formation in the world. In the Panama Papers, CSC is listed as having the same address as WMB Holdings Inc, the Delaware-based company formation business. So we have the head of the SEC owning one of the biggest corporate formation companies in the world,” she said.

“Clayton admits that he or his family have interests in 17 trusts, 12 of which report earnings of ‘more than $1 million’ a year. How much more than $1 million, we don’t know.

“The Carper-Heller bill on beneficial ownership has a lot of weaknesses. Under the bill, the IRS will collect information on beneficial ownership. But the IRS is secretive and under-resourced. It would make much more sense for the Financial Crimes Enforcement Network (FinCEN) to collect beneficial ownership information. They actually want to play this role, they have the capacity to do it, and there is a greater possibility that the information could be made public if FinCEN had it than with the IRS.

“Section 1504 of the Dodd-Frank Act is another area where the US is going backwards and the EU is leading the way. It’s an anti-corruption law which requires resource extractive industries to report donations made to governments in the US and internationally. The government is getting rid of this SEC regulation by using section 803 of the Congressional Review Act.

“In the EU, you have laws which state that companies doing business in the EU have to disclose payments made to EU governments – you should broaden this to include disclosure of donations to any governments.”


Bean expressed her support for the PANA committee’s decision to visit Delaware, saying: “No-one ever goes to Delaware – and their corporate regime is inviting criminals into the US.

“The Delaware Secretary of State Jeffrey Bullock and his deputy Rick Geisenberger are the main reason there has been no progress on shell companies at the federal level. The are telling people in Washington that public registries will mean the end of the world. It would be especially important to convey the work you’re doing on public registries while you’re there. Their opposition role on beneficial ownership is harming law enforcement as well as banks.”

Improving enforcement in the EU

Bean agreed with MEPs that the US is in a more advanced position than the EU when it comes to penalties and enforcement.

“On improving enforcement, there are three things you can do in the EU,” she said. “The first is to increase your fines – your fines at the moment are a fraction of what the banks are earning. Secondly, you should require that the company or bank admits liability. This opens the door for class action lawsuits. Thirdly, make sure that the fines are not tax-deductible. Taxpayers end up paying more than big banks when the fines are tax-deductible.

“In the US, we also use monitors on compliance. We have a monitor who will monitor the institution for a period of two years to ensure that the required changes are actually made. Make the banks pay for their own monitoring.”

Bean also informed the European delegation that there will be tax justice demonstrations taking place in Washington and 60 cities across the US on April 15. The protests will demand Trump releases his tax returns but will also call for ending deferral of corporate taxes and for action on shell companies, she said.