Latest update : 2016-04-26
#Hillary_Clinton and #Donald_Trump will both be hoping to take a step closer to the White House as Delaware votes in its primary Tuesday. But the two share another link to the state: they both have businesses registered there – and at the same address.
Revealed by the UK's Guardian newspaper on Monday, both Clinton and Trump,
leaders in the race for the presidential nominations for the Democratic
and Republican parties respectively, are owners of businesses
registered at the offices of Corporation Trust Centre (CTC) – a
nondescript two-storey building in the city of Wilmington.
They are not the only ones. Some 285,000 companies including the
likes of Apple, American Airlines, Coca-Cola and Walmart are also
registered at the 1209 North Orange Street office building, in a state
notorious for its financial loophole that has helped tens of thousands
of businesses avoid paying billions of dollars in taxes.
Clinton's company, ZFS Holdings LLC, was registered at the CTC's
address in February 2013 – shortly after the former first lady stepped
down as US secretary of state – a search of a business directory on the Delaware state government's website reveals.
Clinton's tax returns
show that she uses ZFS to manage the earnings she receives through her
public speaking and book royalties – for which she earned more than $16
million in 2014.
Her husband and former president Bill Clinton also has a company
registered at the address, named WJC LLC, set up in 2008 and used to
collect payment for his consultation work.
Trump's 378 Delaware-based companies
Several companies owned by Republican frontrunner Trump sit within
the same offices as those officially used by the Clintons. They include
Trump International Management Corp and several companies that form part
of Hudson Waterfront Associates, a Trump partnership to develop luxury
condos in Manhattan, the Guardian reported.
The revelations could be particularly embarrassing for Clinton, who
has promised to crack down on tax havens in the wake of the "Panama Papers" leak.
She recently blasted the "outrageous" practices used by the wealthy
to hide funds offshore and promised to "shut down the so-called private
tax system for the mega-wealthy".
A spokesman for Clinton told the Guardian that "no federal, state, or
local taxes were saved by the Clintons" as a result of their companies
registered in Delaware.
Trump, meanwhile, is quite content with his Delaware dealings. In
fact, according to the man himself, he has a total of 378 companies
registered in the US' second-smallest state.
"We have 378 entities registered in the state of Delaware, meaning I
pay you a lot of money, folks," he told a campaign rally in the state on
Friday. "I don’t feel at all guilty, OK?”
The Delaware 'loophole'
Delaware's reputation as an "onshore" tax haven is well known thanks
to its low taxes, corporate anonymity laws and the ease with which
businesses and individuals can set up shell companies in the state – a
completely legal process.
Delaware's Division of Corporations website boasts that "the State of Delaware is a leading domicile for US and international corporations".
It says that, in a state of just 945,000 people, more than one million businesses are there.
"More than 50 per cent of all publicly-traded companies in the United
States including 64 per cent of the Fortune 500 have chosen Delaware as
their legal home," says the website.
While businesses might not register in Delaware specifically for the
purpose of paying less tax, doing so allows them to exploit a
complicated piece of tax law known as the "Delaware loophole".
As Delaware collects zero tax on income relating to "intangible
assets" such as intellectual property like trademarks or patents,
corporations can use shell or holding companies to shift their state tax
liability to Delaware and avoid paying substantial amounts of tax in
their home states.
Companies such as CTC act as agents to help corporations do this and offer them the use of a physical address in the state.
According to the Institute on Taxation and Economic Policy,
this loophole costs other states a combined $9.5 billion (€8.4 billion)
in lost tax revenue every ten years. It calculates a company can lower
their effective tax rate by anywhere from 15 to 24 percent by
registering in Delaware, saving the average firm between $3 million and
$4 million annually.
Delaware 'dwarfs Panama' as tax haven
The revelations included in the Panama Papers have focused global attention on the use of tax havens by the wealthy.
But while locations such as Panama, the Virgin Islands and the Cayman
Islands have drawn scrutiny, some tax campaigners have called for US
politicians to address problems closer to home.
"More than beautiful beaches and attractive tax-free shopping –
Panama and Delaware are both go-to destinations when shopping for
secrecy," anti-corruption campaign groups Transparency International said earlier this month.
"But Delaware actually dwarfs Panama when it comes to shady business –
it’s home to thousands of secret companies and US laws make it so that
the public can’t know whose behind them. Drug dealers, terrorists, the
corrupt – you name it."
Delaware is one of five US states voting in primaries on Tuesday. The
latest Gravis poll for the state show both Clinton and Trump are on
course.
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