The U.S. Treasury Department is finalizing new tax rules aimed at combating the use of shell companies to evade taxes, U.S. Treasury Secretary Jack Lew said on Saturday amid increased pledges by global finance leaders to cooperate on tax issues.
In a statement to the International Monetary Fund’s steering committee, Lew said the Treasury was finalizing a rule that would require banks to identify the beneficial owners of new customers that are companies.
“In addition, we are about to propose a regulation that would require the beneficial owners of single-member limited liability companies to identify themselves to the Internal Revenue Service, thus closing a loophole that some have been able to exploit,” Lew said.
In the wake of controversy stirred by the so-called Panama Papers, which revealed widespread use of tax havens and shell companies by wealthy global elites, officials from the Group of 20 major economies on Friday threatened to penalize tax haven countries that do not comply with new information-sharing efforts and moves to reduce tax mismatches between countries.
They called for criteria by July to identify non-cooperative jurisdictions.
“Defensive measures will be considered by G20 members against non-cooperative jurisdictions” if progress toward tax goals is not made, the group said in its statement.
Lew said the United States fully supports calls for all countries to automatically exchange financial account information.
The new U.S. shell company rules will follow steps taken by the Treasury earlier this month to curb corporate “inversion” deals in which U.S. firms buy foreign rivals to move their tax jurisdictions offshore.
Those changes were cited as scuttling a $160 billion merger between U.S. drug maker Pfizer Inc and Dublin-based Allergan Plc that would have shifted the combined company headquarters to Ireland, where corporate tax rates are 12.5 percent, compared to the top U.S. corporate tax rate of 35 percent before deductions and credits.
“Tax evasion and tax avoidance hurt government budgets, reduce the equity of our tax systems and hinder global growth,” Lew said.
In his statement, Lew also repeated calls for euro-area countries and Japan to use available fiscal policy space to stimulate domestic demand while enacting structural reforms to their economies.
“Japan should deploy a flexible fiscal policy in the near term that provides a supportive fiscal impulse, while accelerating the implementation of structural reforms, including labor market reforms and opening the service sector to increased competition.”
He offered up a long to-do list for China, saying the world’s second-largest economy “should prioritize reforms that strengthen its social safety net, reduce industrial over-capacity, open up the services sector to competition, tackle rising corporate leverage, confront the associated challenges to the banking system, and allow for a market-determined allocation of credit.”