Wednesday, September 17, 2014


BLOG 154

I have recently returned from my annual trip to Chicago.  It’s not just that its my favourite City.  I go every year for the Midwest Accounting show and stay over for the Chicago Jazz Festival.

The Accounting Show is really more of a conference with show stands rather than simply a show.  It is a two-day event and you get to choose your seminar sessions from a large menu.  The Show is my annual update on what is happening in the US tax world.

However I also listen to other talks.  This year there was a presentation on the state of the Illinois economy.  Unsurprisingly the speaker was upbeat.  Some of the statistics impressed me, particularly that Chicago is number two in the US for attracting foreign investment.  Some were less impressive, such as Chicago accounts for 93% of all Illinois exports, whereas in 2009 it accounted for only 55% (which suggests that the rest of Illinois is struggling) and that it ranks only 31st in tax-friendly States.

But what stuck in my mind is that none of the speakers mentioned the number of graduates from Illinois’ eight universities.  They referred only to STEM graduates.  I had never heard of a STEM graduate before.  STEM degrees are apparently degrees in Science, Technology, Engineering and Maths.  Illinois has had a 42% increase in STEM graduates over the last 10 years, but local businesses such as Microsoft are worried that there are not enough.  Currently when looking to invest, Chicago is Microsoft’s fourth choice (after California, Seattle and New York).  The problem is that there is a shortage of qualified labour.  Some Chicago businesses are introducing scholarships in engineering at High School level to encourage pupils to study STEM subjects in university.

Foreign nationals who study at Chicago universities are five times more likely to invest in Chicago than elsewhere.

This contrasts with the UK where we seem to be interested primarily in turning out graduates full-stop.  English graduates, History graduates, Media Studies graduates, we seem to value them exactly the same as STEM graduates.  And yet, like Chicago, the UK has a lot of unemployment and a lack of skilled labour so we are having to bring in the skilled labour from overseas.  Wouldn’t it be a lot more sensible to take the Chicago route and concentrate on producing STEM graduates rather than anything graduates, particularly if the Chicago experience is that it is the STEM graduates who later in life are the people who decide where to locate branches of the businesses they join.

While in the States I read a press release from Rep Kowalko of Delaware.  He wants Congress to stop criminals from hiding behind Delaware companies!  He explains that Delaware “is a leader in incorporation”.  He doesn’t point out that this is because of a combination of non-disclosure laws and the absence of State corporate tax.  He thinks that labels such as “US Shell Corporation Capital”, “corporate tax haven” and “the new Cayman Islands”, “besmirch Delaware’s image”.  He does not want that to be Delaware’s reputation or Delaware’s reality”.  However he accepts that when fraudsters “take advantage of Delaware’s laws to create anonymous shell companies to launder money for illegal purposes, our state has a real problem that needs to be addressed”.

His solution?  Don’t expect Delaware to do anything about it!  We value our competitive advantage!  Instead Congress should force all 50 States “to require companies from all 50 States to disclose their real, living and breathing beneficial owners when they incorporate and keep this information up to date”.  Not of course to make this information public, as roughly 47 of the 50 States already do, but so that “law enforcement could subpoena information about the natural person (or persons) behind a company without tipping off that company or running into a dead end”.

How’s that for bare-faced cheek!

Most people outside Delaware think that, as the US and other G20 countries increasingly pressurise small islands to disclose more and more information to developed countries against the threat of economic sanctions by the G20, Delaware is fast becoming the only place in the world where secrecy is guaranteed.  That’s a little bit unfair to Delaware as I keep getting e-mails from a company in Wyoming telling me that Wyoming is even more secretive than Delaware!



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