President Obama called on Congress May 6 to fully close loopholes that allow tax evasion, a day after his administration announced a set of new financial regulations.
The rules would force companies to disclose more information about their owners, in an effort to crackdown on tax evaders and money launderers.
The move comes weeks after 11.5 million documents from the Panamanian law firm, Mossack Fonseca, were released. The data leak included names of politicians and celebrities.
“In recent months we’ve seen just how big a problem corruption and tax evasion have become around the globe. We saw what happened with the release of the Panama Papers,” Obama said in a press conference.
“We’ve seen the degree to which both legal practices of tax avoidance that are still unfair and bad for the economy as well as illegal practices that in some cases involve various activities, continue to exist and spread,” he added.
The legislation would further enhance transparency in the U.S. banking system and help law enforcement track down secret owners.
“These actions are going to make a difference, they will allow us to continue to do a better job for tracking financial flows, and making sure that people are paying the taxes that they owe rather than using shell corporations and offshore accounts to avoid doing the things that ordinary Americans, hard-working Americans, are doing everyday, and that’s making sure that everybody pays their fair share,” said Obama.
The president, along with Treasury Secretary Jack Lew, called on the House and said only Congress can fully close the loopholes.
“Illicit financial activity is a critical concern for the United States and our partners around the world,” Lew wrote in a letter to Congress. “Additional statutory authority is necessary to put the United States in the strongest position to combat bad actors who seek to hide their financial dealings and evade their tax responsibilities.”
The new rule would enforce banks to keep records on who owns the companies that use their services. The second change would close a loophole that allows a narrow class of foreign-owned companies to avoid reporting to the IRS.
The new legislation would require companies to know and disclose their owners to the IRS and to allow law enforcement to access that information. Lew also urged senators to ratify eight tax treaties that have deteriorated in the Senate.
He said the treaties are critical “to ensure fair and full enforcement of our tax laws.”
Aside from the Obama administration’s push for transparency, the source who released the Panama Papers also called on Congress May 6 in a manifesto published by the German paper Süddeutsche Zeitung.
“The United States can clearly no longer trust its fifty states to make sound decisions about their own corporate data. It is long past time for Congress to step in and force transparency by setting standards for disclosure and public access,” said the source, who was identified as John Doe.
The Associated Press contributed to this report.