The state of Delaware, the American tax haven that irritates Luxembourg

From our correspondent in Washington

Exasperated by the attacks against his country, Luxembourg Prime Minister Jean-Claude Juncker, who also chairs the Eurogroup, launched a severe counter-offensive: “The G20 is a company without credibility if on the so-called? Black list?” tax havens, there is no Delaware, there is not Wyoming, there is not Nevada? ”he explained Tuesday.

Does this mean that the United States is hiding tax havens within it?

In fact, competition between jurisdictions to attract residents and businesses is a fundamental cultural and political reality across the Atlantic.

Imposing identical standards on all states, particularly in tax matters, would be contrary to the American spirit. This is part of the reason the Obama administration is not as keen as others to fight “tax havens”.

Difference in legislation between states

The United States, as the name suggests, is a federal state. Both citizens and businesses take into account the differences in legislation and taxation between states when choosing to relocate.

It is in this context that the small state of Delaware (870,000 inhabitants), barely larger than Haute-Marne, has become a global giant as a welcoming land for companies. More than 40% of companies listed on the New York Stock Exchange are domiciled there.

Delaware’s specific taxation partly explains this phenomenon: the profits that companies make from their activities outside its borders are not taxed there. In addition, this state, of which the current Vice-President of the United States, Joe Biden, was a senator, does not practice either the local income tax or the “sales tax”, a type of VAT which applies to a lot of property purchases in other US states.

The land of tax-free shopping

“You are entering Delaware, the land of tax-free shopping,” proclaim large signs along the highways at the state border. On the other hand, all federal taxes are applied there, including personal and corporate income taxes.

The popularity of this state with businesses is not just for tax reasons. Delaware’s governance laws are also more beneficial than elsewhere. The courts, for example, are “pro-business” there. Many disputes are decided in trials without juries, giving wealthy corporate lawyers an advantage.

Delaware judges and case law are generally sympathetic to corporate management in shareholder complaints cases, takeover cases, and consumer rights protection. To the concept of “fiscal dumping”, one could therefore add that of “legal dumping”?

Finally, the financial statements of a company registered in Delaware do not need to be physically maintained in state territory. A tax and legal haven, in a way, which has nothing to do with the notions of bank secrecy often associated with offshore centers currently on the spot.

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