WASHINGTON, DC – Global Financial Integrity (GFI) today applauded the introduction of a bill, which would close several major tax loopholes and curtail abusive tax haven secrecy.

The Cut Unjustified Tax (CUT) Loopholes Act, which was introduced in the U.S. Senate today by Senators Carl Levin (D-MI) and Kent Conrad (D-ND), contains several provisions to permanently close offshore tax loopholes, raise revenue, and increase transparency and accountability for multinational enterprises.

“Enactment of the CUT Loopholes Act would be a huge step forward,” said Raymond Baker, director of GFI. “It would scrap several egregious offshore tax loopholes—eliminating incentives to send money and jobs overseas, help level the playing field between small businesses and multinational corporations, increase information and transparency for corporate investors, and strengthen law enforcement and tax collection abilities.”

According to the Joint Committee on Taxation and the Office of Management and Budget, the CUT Loopholes Act would reduce the deficit by at least $155 billion over the next decade with $130 billion of that reduction being attributable to the bill’s offshore tax provisions.

Significant provisions of the legislation would:

• Stop companies run from the United States from claiming foreign status and dodging U.S. taxes on their foreign income (§103) by treating foreign corporations that are publicly traded or have gross assets of $50 million or more and whose management and control occur primarily in the United States as U.S. domestic corporations for income tax purposes.
• Require annual country-by-country reporting (§111) by SEC-registered corporations on employees, sales, financing, tax obligations, and tax payments.
• Strengthen John Doe summons (§115) by streamlining the process used by the IRS to issue summons to a class of persons, such as the clients of an offshore bank, accounting firm, or law firm, while strengthening court oversight.
• Strengthen penalties (§§121-122) on tax shelter promoters and those who aid and abet tax evasion by increasing the maximum fine to 150% of any ill-gotten gains.

GFI was particularly pleased to note the section on country-by-country reporting.

“The country-by-country reporting provision adds a layer of pro-investment, best practices accountability to this bill,” said Mr. Baker. “For investors, the more information available about a company’s business practices and balance sheets, the better. This reporting requirement would also help anti-corruption and economic development efforts in developing countries by creating more transparency with respect to whether a multinational is contributing to the tax base of the developing countries in which it operates, or whether it is engaging clever accounting tricks to move that money to tax havens.”

A full summary of the legislation can be found here.

###

Notes to Editors:

1. Click here to read Sen. Levin’s and Sen. Conrad’s press release on the legislation
2. Click here to read a full summary of the legislation.
3. Click here for more information on country-by-country reporting.
4. Click here to read the Financial Accountability & Corporate Transparency (FACT) Coalition’s statement on the legislation.

Contact:

Clark Gascoigne
+1 202 293 0740 ext. 222
cgascoigne@gfintegrity.org

Global Financial Integrity

WASHINGTON, DC – Global Financial Integrity (GFI) today applauded the introduction of a bill, which would close several major tax loopholes and curtail abusive tax haven secrecy.

The Cut Unjustified Tax (CUT) Loopholes Act, which was introduced in the U.S. Senate today by Senators Carl Levin (D-MI) and Kent Conrad (D-ND), contains several provisions to permanently close offshore tax loopholes, raise revenue, and increase transparency and accountability for multinational enterprises.

“Enactment of the CUT Loopholes Act would be a huge step forward,” said Raymond Baker, director of GFI. “It would scrap several egregious offshore tax loopholes—eliminating incentives to send money and jobs overseas, help level the playing field between small businesses and multinational corporations, increase information and transparency for corporate investors, and strengthen law enforcement and tax collection abilities.”

According to the Joint Committee on Taxation and the Office of Management and Budget, the CUT Loopholes Act would reduce the deficit by at least $155 billion over the next decade with $130 billion of that reduction being attributable to the bill’s offshore tax provisions.

Significant provisions of the legislation would:

• Stop companies run from the United States from claiming foreign status and dodging U.S. taxes on their foreign income (§103) by treating foreign corporations that are publicly traded or have gross assets of $50 million or more and whose management and control occur primarily in the United States as U.S. domestic corporations for income tax purposes.
• Require annual country-by-country reporting (§111) by SEC-registered corporations on employees, sales, financing, tax obligations, and tax payments.
• Strengthen John Doe summons (§115) by streamlining the process used by the IRS to issue summons to a class of persons, such as the clients of an offshore bank, accounting firm, or law firm, while strengthening court oversight.
• Strengthen penalties (§§121-122) on tax shelter promoters and those who aid and abet tax evasion by increasing the maximum fine to 150% of any ill-gotten gains.

GFI was particularly pleased to note the section on country-by-country reporting.

“The country-by-country reporting provision adds a layer of pro-investment, best practices accountability to this bill,” said Mr. Baker. “For investors, the more information available about a company’s business practices and balance sheets, the better. This reporting requirement would also help anti-corruption and economic development efforts in developing countries by creating more transparency with respect to whether a multinational is contributing to the tax base of the developing countries in which it operates, or whether it is engaging clever accounting tricks to move that money to tax havens.”

A full summary of the legislation can be found here.

###

Notes to Editors:

1. Click here to read Sen. Levin’s and Sen. Conrad’s press release on the legislation
2. Click here to read a full summary of the legislation.
3. Click here for more information on country-by-country reporting.
4. Click here to read the Financial Accountability & Corporate Transparency (FACT) Coalition’s statement on the legislation.

Contact:

Clark Gascoigne
+1 202 293 0740 ext. 222
cgascoigne@gfintegrity.org

__________

Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system.

For additional information please visit www.gfintegrity.org.

Follow us on: Twitter | Facebook | YouTube

Proposals to Amend Foreign Bribery Law Could Significantly Undermine Human Rights, Commerce, U.S. Standing in the World

WASHINGTON, DC – Earlier today more than 30 civil society and business groups, including human rights and anticorruption organizations, sent a letter to every member of the U.S. House of Representatives and U.S. Senate expressing their opposition to any efforts to amend the world’s flagship anticorruption legislation, the U.S. Foreign Corrupt Practices Act (FCPA).

The signatories, who include, among others¹, Amnesty International, Calvert Investments, Citizens for Responsibility and Ethics in Washington, EarthRights International, Global Financial Integrity, Global Witness, Human Rights Watch, International Corporate Accountability Roundtable, Jubilee USA Network, Open Society Policy Center, Oxfam America, Revenue Watch Institute and Transparency International-USA are concerned that Members of Congress in both the House and Senate are considering introducing legislation that would weaken the decades old law.

The organizations stated in their correspondence that any narrowing of the law, which serves as the model for other international anticorruption conventions and foreign anticorruption laws, would have a negative effect on global commerce, human rights, and the standing of the U.S. in the world.

We believe that any amendments to more narrowly define key terms of the FCPA would constrain the ability of the Department of Justice and the Securities and Exchange Commission to effectively enforce the FCPA, limit the potential liability of companies violating the FCPA to a greater degree than is already provided under the maximum sentencing provisions of the Act, and thereby significantly undermine the statute as a tool to curb corruption. 

Our constituencies are strongly opposed to any effort to open up this legislation.  Even the perception that the U.S. commitment to combating bribery is waning would weaken the global fight against corruption.  As leaders in the public interest community dedicated to advancing human rights and curbing corruption, we therefore urge you to halt any attempt to introduce amendments to the FCPA.

“Given that this is an anticorruption law, Members of Congress looking to amend the FCPA should consult with anticorruption and human rights organizations before considering the introduction of legislation,” said Global Financial Integrity Director Raymond Baker, who signed the letter on behalf of GFI. “It is critical that legislators comprehend that there is far more at stake than a local constituent’s short term bottom line.”

“It is important for Congress to understand that changes to the FCPA can send the wrong message and weaken the enforcement of anticorruption laws around the world,” added Claudia J. Dumas, President and CEO of Transparency International – USA, who also signed the letter and noted that the Department of Justice is working on guidance on the FCPA’s enforcement provisions.

“These proposals could deliver a devastating blow to the fight against human rights abuses and corruption across the globe,” said Simon Taylor, founding Director at Global Witness. “Lawmakers should not underestimate the level of support for the FCPA. Efforts to undermine it will be extremely damaging to the reputations of those involved,” he concluded.

1. The full list of organizations includes: the Advocates for Human Rights, Amnesty International, Asia Initiatives, Calvert Investments, Caux Round Table, Center for Corporate Policy, Citizens for Responsibility and Ethics in Washington (CREW), Crude Accountability, EarthRights International, EG Justice, Financial Accountability and Corporate Transparency (FACT) Coalition, Foreign Policy in Focus, Free the Slaves, Freedom House, Friends of the Earth – US, Global Financial Integrity, Global Rights, Global Witness, Human Rights Watch, International Corporate Accountability Roundtable, Jubilee USA Network, Just Foreign Policy, Main Street Alliance, New Rules for Global Finance Coalition, Open Society Policy Center, Oxfam America, Public Citizen, Publish What You Pay United States, Revenue Watch Institute, Tax Justice Network – USA, Transparency International – USA, United to End Genocide, and U.S. PIRG.
2. The full letter to members of the U.S. House of Representatives can be read here.
3. The full letter to members of the U.S. Senate can be read here.

Journalist Contacts:

Clark Gascoigne
cgascoigne@gfintegrity.org
+1 202-293-0740 ext.222

Stefanie Ostfeld
sostfeld@globalwitness.org
+1 202-621-6674

Reuters

CARSON CITY, NV – Aaron S. Young, Wayne Andre McMiniment and Richard C. Neiswonger share two things in common.

Each man built a thriving business that helps people set up shell companies, firms with few real operations, in the state of Nevada.

Read more…

NEW YORK – The President announced his intention today to advocate for Congress to adopt laws requiring the disclosure of beneficial ownership for corporations at the time of company formation, an idea already proposed by Senators Carl Levin and Chuck Grassley in S. 1483, the Incorporation Transparency and Law Enforcement Assistance Act, as well as a U.S. commitment to implement the Extractive Industries Transparency Initiative (EITI), as part of the launch of the new government transparency initiative, the Open Government Partnership.

“We are excited to see this clear commitment by the Administration to combat the creation of anonymous companies.  Doing so is a critical step forward in helping to deter criminals and tax evaders from laundering and hiding money in the U.S. financial system, while also giving a major boost to anti-corruption and good governance efforts in developing countries,” said Global Financial Integrity managing director Tom Cardamone, who attended the launch in New York today.

“The adoption of EITI is also a welcome commitment,” continued Cardamone.  “It is an important complement to the Cardin-Luger extractive industry disclosure provisions of the Dodd-Frank Act.  It will level the playing field for extractive industry companies operating in the U.S. by requiring the Cardin-Lugar type disclosures from unlisted companies operating on Federal lands, in addition to the listed companies covered by the Cardin-Lugar provisions.”

Highlights of the U.S.’ Open Government Partnership (OGP) Plan include:

Beneficial Ownership Disclosure Requirements:

Increase Transparency of Legal Entities Formed in the U.S.

Legal entities can provide access to the international financial system for illicit actors and may frustrate financial investigations. To increase transparency over the next year, we will:

Advocate for Legislation Requiring Meaningful Disclosure. As a critical element of a broader strategy to safeguard the international financial system from such abuse of legal entities, the Administration will advocate for legislation that will require the disclosure of meaningful beneficial ownership information for corporations at the time of company formation.

Transparency and Accountability in the Extractive Industries Sector:

1. Implement Extractive Industries Transparency Initiative

The Extractive Industries Transparency Initiative (EITI) has developed a voluntary framework under which governments publicly disclose their revenues from oil, gas, and mining assets, and companies make parallel disclosures regarding payments that they are making to obtain access to publicly owned resources. These voluntary disclosures are designed to foster integrity and accountability when it comes to development of the world’s natural resources.  This Administration:

• Is Hereby Committing to Implement the EITI to Ensure that Taxpayers Are Receiving Every Dollar Due for Extraction of our Natural Resources. The U.S. is a major developer of natural resources. The U.S. collects approximately $10 billion in annual revenues from the development of oil, gas, and minerals on Federal lands and offshore, and disburses the bulk of these revenues to the U.S. Treasury, with smaller portions disbursed to five Federal agencies, 35 States, 41 American Indian tribes, and approximately 30,000 individual Indian mineral owners. By signing onto the global standard that EITI sets, the U.S. Government can help ensure that American taxpayers are receiving every dollar due for the extraction of these valuable public resources.

• Will Work in Partnership with Industry and Citizens to Build on Recent Progress. The Administration has already made important strides in reforming the management of our natural resources to ensure that there are no conflicts of interest between the production and the collection of revenues from these resources. Signing onto the EITI initiative will further these objectives by creating additional “sunshine” for the process of collecting revenues from natural resource extraction. Industry already provides the Federal Government with this data. We should share it with all of our citizens. Toward that end, the Federal Government will work with industry and citizens to develop a sensible plan over the next two years for disclosing relevant information and enhancing the accountability and transparency of our revenue collection efforts.

The Open Government Partnership is overseen by eight governments and nine civil society organizations, including Global Financial Integrity. Forty-six governments have so far agreed to take part, with Canada being the most recent signatory.  To become a member, participating countries must make an Open Government Declaration; deliver a country action plan; and report on progress.

The U.S. Action Plan is available here.

To request an interview with Global Financial Integrity spokespersons contact Monique Perry Danziger, mdanziger@gfip.org, 202-904-3113.

###

Contact:

Monique Perry Danziger
mdanziger@gfip.org
+1 202 904 3113

——-

The Task Force on Financial Integrity and Economic Development addresses inequalities in the global financial system that penalize billions of people, and advocates for improved transparency and accountability.

Global Financial Integrity is a coordinating committee and founding member of the Task Force on Financial Integrity & Economic Development.

For additional information please visit http://www.financialtaskforce.org.

Global Financial Integrity

WASHINGTON, DC – Proponents of tax fairness and financial accountability applauded the news yesterday of the Senate’s passage of patent-reform legislation containing a provision to eliminate tax strategy patents.

“The ability to patent tax strategies enabled tax practitioners to require U.S. citizens to pay those practitioners in order to benefit from U.S. tax laws. Tax laws apply to everybody equally, and these patents were forcing citizens to pay for access to something that was already their right under the law,” said Heather Lowe, Legal Counsel and Director of Government Affairs at Global Financial Integrity. “Many of these patented tax schemes involved the use of offshore accounts in tax havens and may have skirted the line between legal tax avoidance and illegal tax evasion.”

The legislation will now go to President Obama for his signature.

“Allowing patents on tax strategies gave tax practitioners legal protection for schemes which may have complied with the letter of our tax laws while they simultaneously violated the spirit of those laws,” said Ms. Lowe. “This is a positive development for transparency and accountability and takes us a big step closer to closing the $345 billion U.S. tax gap.”

###

Contact:

Monique Perry Danziger
mdanziger@gfip.org
+1 202 904 3113

——-

The Task Force on Financial Integrity and Economic Development addresses inequalities in the global financial system that penalize billions of people, and advocates for improved transparency and accountability.

Global Financial Integrity is a coordinating committee and founding member of the Task Force on Financial Integrity & Economic Development.

For additional information please visit http://www.financialtaskforce.org.

Reuters

NEW YORK – A spate of spectacular collapses of Chinese stocks listed on American exchanges has cost U.S. investors billions of dollars. The fiasco has sparked multiple investigations. Accusations are swirling in Washington and Beijing.

It all began with an email sent out of the blue a decade ago to a Texas businessman named Timothy Halter.

Read more…

“dismissed as meaningless a document, based on government data, presented by the senator, Carl Levin, a Michigan Democrat, indicating that fewer than 6,000 of more than 1.1 million offshore accounts and businesses were properly disclosed and therefore legal. Pressed by Senator Levin about whether the disparity between reported offshore accounts and their actual numbers was significant, Mr. O’Neill replied: ”I find it amusing.”

The scale of it was startling, even then:

“His testimony, to the Senate Permanent Subcommittee on Investigations, came before Robert M. Morgenthau, the district attorney in Manhattan, described a scale of bank deposits in tax havens far greater than most experts suspected. Citing previously secret Federal Reserve Bank data, Mr. Morgenthau said that more than $800 billion of American money is on deposit in just one tax haven, the Cayman Islands.

That sum, equal to one-fifth of all the bank deposits in the United States, he said, is so large that it cannot be solely, or even primarily, the fruits of criminal activity like drug dealing. Rather, Mr. Morgenthau said, these funds must be the product of huge and growing tax evasion by wealthy Americans who have little, if any, fear of prosecution.

He said his office’s efforts to pursue tax cheats had often been stymied not just by foreign governments, but by the federal government, especially the Justice and State Departments and the intelligence agencies.”

In light of that appalling and then-pervasive attitude, there is no doubt that even though things remain very far from rosy, and the offshore system in very rude health indeed, the mood in the United States has improved significantly.

Among other things we now have the U.S. authorities aggressively pursuing Swiss banks that have been helping U.S. tax cheats; we have the Foreign Account Tax Compliance Act (FATCA) and we now have Senator Levin’s reinvigorated Stop Tax Haven Abuse Act, tightening up FATCA and introducing new penalties and tools for fighting the offshore criminal scourge.

At the very root of all the improvements is a change in the public tolerance of these activities.

There’s still a very, very long way to go – but the tide is shifting. Who could imagine a U.S. Treasury Secretary, of all people, saying such an ‘I-find-it-amusing’ thing today.  With the help of groups such as TJN-USA, the FACT coalition, Citizens for Tax Justice, Business and Investors against Tax Haven Abuse, Raymond Baker and Global Financial Integrity, US Uncut, and a growing army of others, we expect tremendous progress in the years to come.

(From the Tax Justice blog, with permission.)

Nick Ares/Flickr*

Some of our nation’s biggest corporations are planning a tax holiday and they want you to pick up the tab.

Actually, you already pay for their routine tax avoidance through the use of tax havens in Bermuda, the Cayman Islands and elsewhere. These accounting acrobatics cost the U.S. Treasury $100 billion a year. Now they want Congress to pass a special tax holiday for money they “repatriate” back to the United States.

There’s nothing patriotic about this repatriation being pushed by Google, Cisco, Pfizer and other companies in the Win America campaign. To sell the tax holiday, they claim it will produce a burst of jobs and investment. In fact, Congress passed a “one-time-only” tax holiday in 2004 with similar promises. Instead, it produced a burst of shareholder dividends and stock buybacks, which goosed the pay of CEOs.

Corporations laid off workers and shifted even more income and investment to offshore tax havens in the wake of the 2004 tax holiday.

“Why should we reward firms for successfully gaming the tax system when we in turn are called on to make up the missing tax revenues?” Edward Kleinbard, former chief of staff of Congress’s Joint Committee on Taxation, told Bloomberg. “Much of these earnings overseas are reaped from an enormous shell game: Firms move their taxable income from the U.S. and other major economies – where their customers and key employees are in reality located – to tax havens.”

A favorite accounting trick is transferring a patent from the U.S. parent company to a subsidiary – often a shell company – in a tax haven. Profits from the patent go largely untaxed offshore while the costs of development, marketing and management remain in the U.S. where they are taken as tax deductions.

Pfizer was the largest beneficiary of the last tax holiday, bringing $37 billion back to the United States and paying just $1.7 billion in federal corporate income taxes. It laid off 10,000 American workers in the following months. The U.S. is the world’s most profitable drug market and yet over the last three years, Pfizer – maker of Lipitor, Viagra and much more – has reported $7.9 billion in U.S. losses while claiming $37.8 billion in profits in the rest of the world. Pfizer, like the rest of Big Pharma, is heavily subsidized by taxpayer-funded research at the National Institutes of Health and elsewhere. It should not be rewarded with another tax holiday.

Bloomberg reported that Win America member “Google reduced its income taxes by $3.1 billion over three years by shifting income to Ireland, then the Netherlands, and ultimately to Bermuda.” What a corporate ingrate. Google would not exist without the Internet, and the Internet grew out of U.S. government research beginning in the 1960s. In the 1990s, the U.S. National Science Foundation (NSF) funded the Digital Library Initiative research at Stanford University that Larry Page and Sergey Brin, now billionaires, developed into Google. Brin was also supported by an NSF Graduate Student Fellowship.

Increasingly, U.S. multinational corporations want to benefit from government spending on education, infrastructure, research, health care and so on without paying for it. Today, large corporations pay, on average, 18 percent of their profits in federal income taxes and as a group contribute just 9 percent toward federal government bills – down from 32 percent in 1952. The Congressional Joint Committee on Taxation says a new tax holiday would cost $79 billion.

A dozen national and state business organizations led by Business for Shared Prosperity recently wrote members of Congress urging them to oppose the tax holiday. The letter said, “When powerful large U.S. corporations avoid their fair share of taxes, they undermine U.S. competitiveness, contribute to the national debt and shift more of the tax burden to domestic businesses, especially small businesses that create most of the new jobs.”

There is no excuse for repeating a policy that’s a proven failure. It would be even worse this time around, as corporations would redouble their efforts to shift profits overseas in anticipation of the next tax holiday. Congress should close the tax loopholes that reward companies for transferring U.S. profits, jobs and investment abroad – not encourage them.

Real patriots pay their fair share of taxes. They don’t run out on the bill.

Copyright 2011 Scott Klinger and Holly Sklar, Business for Shared Prosperity. Op-Ed Syndicated by the American Forum.

Image License:  Some rights reserved by aresauburn™

WASHINGTON – The Internal Revenue Service is giving more time to Toronto-Dominion Bank (TD), Aegon NV (AGN) and other banks based outside of the U.S. to implement a controversial tax reporting rule.

In guidance issued yesterday on the Foreign Account Tax Compliance Act, the IRS didn’t address some of the central questions that have caused financial institutions to fight the proposal. For instance, one of the rule’s most complex provisions — a requirement to withhold 30 percent from payments that might have indirectly originated in the U.S. — remains in the proposal.

Read more…