Delaware is a southern state

Tax havens: Delaware, darling of global corporations


Read on one side

The light brick building is inconspicuous. A long block of houses. The only splash of color is a wine-red awning over the entrance. There are no mailboxes here. Just a bell that films the visitor. The first glass door opens. And another one. Then it's over. A receptionist waves it away. Please send press inquiries to the headquarters in New York. Goodbye.

CT Corporation is headquartered here at # 1209 North Orange Street in Wilmington. It is a company whose business requires discretion. Because CT Corporation has made the registration of companies its business model - and nowhere is things going better than here in Wilmington, the city of 70,000.

An estimated 200,000 companies are registered at North Orange Street # 1209. All letterbox companies - without a letterbox. The companies include US corporations such as Apple and Google, but also German companies such as Daimler and Volkswagen. This even earned the inconspicuous office building an entry in Wikipedia. "The companies only exist in the drawer of any lawyer's desk," says David Brunori, a lawyer at George Washington University in Washington. "Delaware is your mailbox. There is no desk, no pen, no secretary."

"Corporate Capital of the United States"

Just 917,000 people live in Delaware, a good two hours south of New York City. But the second smallest state in the USA confidently calls itself the "corporate capital of the United States". If you look at the numbers, the marketing experts in Delawares are right: More than a million companies are registered here, including 64 percent of the world's 500 largest listed corporations. Why it is like that? CT Corporation has an unobjectionable explanation ready: "Companies choose Delaware for its excellent corporate law, successful legal practice and business-oriented court," the company said via email.

US State Tax Policies

Delaware, a tax haven with a long tradition

After New Jersey, Delaware passed its own business-friendly law in 1899. The state government lowered taxes and created bureaucratic hurdles for companies. When New Jersey under the then Governor Woodrow Wilson withdrew shortly afterwards and abolished many tax breaks for companies, Delaware further liberalized and promoted the location nationally and internationally.

Tax policies of other US states

Unlike in Germany, US tax law offers a great deal of freedom. At the federal level, there are only requirements for income and corporation tax and stock corporation law. The top tax rate for companies is currently 35 percent at the federal level - making it the highest of all industrialized nations.

Other tax issues are a matter of state sovereignty. You can customize how companies are registered and what taxes and fees they levy.

The following states waive personal income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

Nevada, South Dakota, Washington, and Wyoming waive corporate taxes.

But behind such insignificant words there is de facto a tough, aggressive tax policy. The most important rule: Delaware does not impose any corporate taxes on holdings that do not manufacture locally, other than an annual registration fee. Profits from licenses, patents, trademarks and copyrights are also tax-free. Hundreds of thousands of companies have therefore founded subsidiaries in Delaware over the past few decades. "They keep their tax burden low by moving profits to Delaware," says lawyer Brunori. "They come for one main reason: to save taxes elsewhere."

In this way, other countries lose taxpayers' money in the millions, if not billions, every year. It is hardly surprising that Delaware has come under fire - and of all things from its own tax haven industry. States such as the Cayman Islands or Luxembourg have sharply criticized the Delaware business model. "Delaware and Nevada are tax havens and havens for money laundering, these must be drained just as well," said Austrian Finance Minister Maria Fekter, who has so much trouble herself with the task of banking secrecy. The German Finance Minister Wolfgang Schäuble also recently denounced the US's double standards. "In their own country, the Americans are not as consistent in the fight against tax havens, if you think of the state of Delaware," he says.

Richard J. Geisenberger

heads the corporate division at the State Department of Delaware

Richard Geisenberger waves it away. He has heard these allegations too often. "The truth is: we have adapted to the needs of companies," he says. The 48-year-old is Delaware's chief strategist when it comes to corporate taxes. He heads the corporate department in the State Ministry.

Now he is sitting in a large conference room in the Elbert N. Carvel building, the Ministry headquarters in Wilmington. Heavy carpets swallow every step, and photographs of Delaware hang on the walls. The huge, dark conference table makes Geisenberger appear smaller than it is. Black, elegant glasses, classy suit: Geisenberger is more reminiscent of a successful manager than a politician.