Treasury Secretary Jack Lew defended the U.S. tax code Monday from claims that it allows evasion, and told an audience in Washington, D.C., that it is one of the best tax systems in the world.
“We have a tax system that is amongst the best in the world, and is a standard that others aspire to in terms of its independence and its reach,” Lew said in a question-and-answer session at the Council on Foreign Relations.
Lew was pushed to justify the U.S. tax system, and by extension his own leadership, in light of the recent “Panama Papers” leak of tax documents outlining the extent to which Panama acts as a tax haven for wealthy individuals in other countries. Specifically, a member of the audience challenged Lew to defend the Treasury’s role in allowing American taxpayers and businesses to avoid U.S. taxation.
“We have put in place the ability to see what people’s different income streams are,” Lew responded. “If it’s not subject to tax, that’s a policy issue, not a transparency issue.”
Many other countries, Lew argued, have “weak” systems and require significant technical help from the U.S. in making sure people or businesses are not skirting taxation.
Lew cited the international “outrage” over the Panama Papers disclosures as an example of the need for U.S. leadership on international economic coordination, and a reason for declining faith in international institutions and trade. One way to restore that faith, he argued, would be to eliminate “stateless income,” or the income of multinational corporations that they manage to avoid having taxed by any country.
Lew also defended the U.S. as the leader in setting new rules meant to crack down on companies illicitly shifting income out of their home countries and into tax havens. Those rules, agreed to by the member nations of the Organization for Economic Development and Cooperation, have elicited major pushback from American business groups.
President Obama has also backed business tax reform to lower the corporate tax rate and eliminate many tax breaks, Lew noted. Doing so would reduce both the incentive and the ability for companies to evade taxes.
