The US state of South Dakota now rivals notorious tax shelters like Panama, the Cayman Islands, and Switzerland as a destination for the top 1% to shield their wealth from the hands of tax authorities, the newly released Pandora Papers show.
Pandora papers
Quick recap: The Pandora Papers, published a while ago, represent one of the biggest leaks of financial docs in history. They show how celebrities, world leaders, and business magnates take advantage of opaque financial laws to hold onto as much of their wealth as they can and, in some cases, get away with crimes.
And while none of that is particularly surprising, what is surprising is the changing geography of tax havens. The ultrarich are taking their money out of traditional tax shelters like the island of Jersey (one of the Channel Islands) and stashing it in rural US states like Nevada, Wyoming, and, most of all from South Dakota.
Of the more than 190 US trusts appearing in the Pandora Papers, more than 80 were in South Dakota.
South Dakota’s trust industry held $367 billion in anonymous, untraceable assets in 2020, a nearly 4x increase from $75.5 billion in 2011. And these trusts aren’t catering to cattle ranchers who made it big they’re linked to individuals in 40 different countries outside the US.
But why South Dakota?
It’s not why most people arrive in South Dakota by accident. For decades, the state has intentionally loosened regulations on its financial services sector to grow its economy and create finance jobs, particularly in the city of Sioux Falls.
This deregulation push, spurred by trust industry insiders, turned a South Dakotan trust into the most potent force-field money can buy.
By setting up a trust in South Dakota:
- - Your assets are protected from claims by creditors, angry clients, or even your ex-spouse (a level of security not afforded by other tax havens).
- - You are not subject to income tax, inheritance tax, or capital gains tax in the state because South Dakota has none of those.
- - You never actually have to go to South Dakota.
The US more broadly is an attractive place to hide your wealth. After years of bashing “offshore” havens for sheltering tax avoiders, the US has moved up to second in the world rankings for financial secrecy.
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FEB
2022
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