Obama stresses need for action on corporate tax evasion

Video by PBS NewsHour

WASHINGTON — New financial regulations would force companies to disclose more information about their owners, as part of a crackdown on tax evaders and money launderers, the Obama administration announced on Friday.

President Barack Obama touted the proposals on Friday, as he urged Congress to pass legislation that he said would further enhance transparency in the U.S. banking system and help law enforcement track down secret owners. The president linked the push to the disclosures in the “Panama Papers,” the leaked documents that revealed how many wealthy individuals and government officials from around the globe use shell companies to hide assets and avoid paying taxes.

“We’ve seen just how big a problem corruption and tax evasion have become around the globe,” Obama said Friday at the White House, as he promised to continue an effort “to make sure that the rules aren’t rigged and our economy works for everybody.”

The president spoke a day after the Treasury Department announced two new measures aimed at forcing companies to better track and disclose ownership to the IRS.

One, the so-called customer due diligence rule, was finalized Thursday after four years’ consideration. The rule dictates how banks keep records on who owns the companies that use their services.

A second proposed rule would close a loophole that allows a narrow class of foreign-owned companies to avoid reporting to the IRS.

As Treasury announced the regulations, Secretary Jacob Lew wrote to Congress urging lawmakers to go further. Lew said congressional action was needed to give law enforcement tools to “to combat bad actors who seek to hide their financial dealings and evade their tax responsibilities.”

Treasury sent new draft legislation to Congress that would require companies to know and disclose their owners to the IRS and to allow law enforcement to access that information. And he called on Congress to pass legislation that would require U.S. banks and other financial institutions to collect and disclose more detailed information about foreign account holders — information it requires foreign banks to collect about Americans.

The high profile push is unlikely to get much traction in a divided Congress that has shown no appetite for tackling contentious tax battles or taking on financial service industry in an election year.

Several anti-corruption experts said the new rule for banks’ record-keeping leaves loopholes of its own and the proposed legislation is watered down. “It appears the rule is quite weak,” Mark Hays, senior policy adviser at Global Witness, said in a conference call with reporters Friday.

For example, special accounts set up by lawyers to hold company funds could be excluded from requirements for banks to determine a company’s true owners, Hays said.

Heather Lowe, director of governmental affairs at Global Financial Integrity, called the administration bill “a very watered down version.”

The American Bankers Association said many of its concerns about the rule as it was being drafted were taken into account by the Treasury regulators in the final version. “We were pleased,” the lobbying group’s president, Rob Nichols, said in a statement.

A two-year transition period for the rule to take effect, “along with manageable expectations for customer and … ownership identification, alleviates some of the potential burden,” he said.

The administration also made a push on another front. Obama and Lew both urged lawmakers to ratify eight tax treaties that have languished in the Senate. Obama said the treaties would improve law enforcement’s ability to pursue tax dodgers hiding assets abroad by enabling cooperation with foreign governments. He pointed to Sen. Rand Paul, R-Ky., as holding up the treaties, adding Paul was “a little quirky” on the issues.

Paul has said he opposes the agreements for privacy reasons, saying they would let governments collect and share citizens’ financial information.

AP Business Writer Marcy Gordon contributed to this report.