The Biden administration acknowledges political will as the primary impediment to successfully improving US and other like-minded governments’ fight against corruption on page eight of the United States Strategy on Countering Corruption. The strategy released earlier this week was announced in the runup to the White House Summit on Democracy, answering the question many of us had about the purpose of the conference.
A June 3, 2021 presidential national security study (NSS) memorandum got the now public process going which resulted in a Notice of Proposed Rulemaking (NPRM) for Beneficial Ownership Information Reporting Requirements. Published on Tuesday, comments on the 55-page proposal are due February 7; we would expect final rules as early as April but before Memorial Day. We also would expect mountains of comments as the rules would affect many countries and a few tax-haven states, particularly, Delaware, Nevada, and South Dakota.
A House Ways and Means subcommittee held a hearing yesterday focused on the tax implications of federal revenue forgone due to illegal strategies to defray or avoid taxes. Identifying “beneficial ownership” is the policy clarification sought by Biden. Shell companies and certain trusts are often used to shield information from law enforcement that might otherwise be used to notice and stop illegal activities. A Joint Committee on Taxation brief detailed many issues addressed in the NSS and NPRM.
The legislative effort isn’t original. Former Senator Carl Levin of Michigan worked tirelessly to get the Obama administration and Democrats in Congress to take up this fight. He could not come to agreement with Members of Congress from tax-haven states, one of whom at the time was the Senate majority leader, Harry Reid of Nevada. Providers of professional business services in those and other states undoubtedly will make it no less difficult to fully embrace the NPRM or the final rule. Treasury Deputy Secretary Wally Adeyemo on Monday discussed core principles of the NSS, mentioning an IMF study estimate that corruption costs governments $1trillion annually.
Regardless of one’s views on Biden, his agenda, or handling of the job (a cocktail of decent, not good, and bad), the highest level of global corruption practiced as governance by authoritarians doesn’t like attention. The NSS and conference throw shade on state-sponsored and other levels of corruption. If the effect of such malfeasance is as dire as the administration believes, beneficiaries of democratic values (including markets) might appreciate an anti-corruption update that recognizes systemic technological and financial trends favoring lawbreakers.
