From the NYTIMES:
Mossack Fonseca employees were named as the companies’ officers, avoiding whenever possible any link to the Ponsoldt family. The firm even asked a Hong Kong branch of Barclays, the international bank, to override its rules for proof of the so-called beneficial owners of the accounts.
“This is a very special client of ours,” a Mossack Fonseca lawyer wrote, conceding that the firm had intentionally created such a maze of companies so it “leaves us in the position to legally argue that our client is NOT the owner of the structure.” It was not clear if the bank complied.
In a recent paper on business ownership and taxation in the United States, we found complex ownership structures to be common place in the partnership sector:
Partnership ownership is not only concentrated, but also opaque. First, twenty percent of partnership income is earned by partners that we have not been able to classify in ad- ministrative data. Second, following money through partnership structures—between the partnership generating the income and the ultimate owners taxed on that income—proves challenging as well. We develop an algorithm that recursively traces income through partnership structures to ultimate non-partnership owners and attempts to assign that income back to an originating partnership. This recursive algorithm reaches a fixed point before all partnership income has been successfully assigned: fifteen percent of income is in circular structures and cannot be uniquely linked to an originating partnership. Together, the union of income flowing (1) to unclassifiable partners and (2) through circular partnerships amounts to $200 billion or thirty percent of income earned in the partnership sector overall.
From David Card, Ana Rute Cardoso, Joerg Heining, and Patrick Kline:
We review the literature on firm-level drivers of labor market inequality. There is strong evidence from a variety of fields that standard measures of productivity – like output per worker or total factor productivity – vary substantially across firms, even within narrowly-defined industries. Several recent studies note that rising trends in the dispersion of productivity across firms mirror the trends in the wage inequality across workers. Two distinct literatures have searched for a more direct link between these two phenomena. The first examines how wages are affected by differences in employer productivity. Studies that focus on firm-specific productivity shocks and control for the non-random sorting of workers to more and less productive firms typically find that a 10% increase in value-added per worker leads to somewhere between a 0.5% and 1.5% increase in wages. A second literature focuses on firm-specific wage premiums, using the wage outcomes of job changers. This literature also concludes that firm pay setting is important for wage inequality, with many studies finding that firm wage effects contribute approximately 20% of the overall variance of wages. To interpret these findings, we develop a model where workplace environments are viewed as imperfect substitutes by workers, and firms set wages with some degree of market power. We show that simple versions of this model can readily match the stylized empirical findings in the literature regarding rent-sharing elasticities and the structure of firm-specific pay premiums.
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Here is a NBER discussion of some my recent work on tax policy and the economy
In 1980, about 80 percent of business income went to traditional corporations, but research presented at the NBER’s annual Tax Policy and the Economy Conference this year shows that now roughly half of business income is passed through to entities outside of the traditional corporate sector. Researchers find that this change has had a significant effect on the amount of tax revenue government has been able to collect, and has implications for tax reform as well. Work on these subjects and others is featured on the newest NBER research theme page.