“Just the FACTs” is a round-up of news stories and information regarding efforts to combat corrupt financial practices, including offshore tax haven abuses, corporate secrecy, and money laundering through the financial system.
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Here is the State of Play
Bipartisan support for the ENABLERS Act continues to surge with dozens of new endorsements
The bipartisan ENABLERS Act continues to gain steam heading into conference as an amendment to the annual must-pass defense bill, providing lawmakers with a historic opportunity to end the complicity of U.S. professionals in the laundering of illicit funds by kleptocrats and criminals the world over.
On the heels of an endorsement letter sent in late October by more than 80 non-profit, anti-corruption, environmental, labor, and economic and social justice groups to congressional Democratic leadership in support of the landmark anti-money laundering bill, ENABLERS received another buoying round of endorsements, this time from law enforcement groups in the form of the National District Attorneys Association and the National Association of Assistant U.S. Attorneys.
In addition, a letter to Congress from nearly two dozen foreign policy and national security experts, whose signatories include diplomats, scholars from prominent D.C. think tanks, and former administration officials, was released alongside an op-ed in the Washington Post by political analyst and commentator Josh Rogin. Rogin was quick to note that “when kleptocratic leaders and their cronies use democracies to wash their illicit proceeds, it’s not just a moral failing but a national security threat as well.”
With the midterm elections over, the National Defense Authorization Act (NDAA) is expected to be passed in the next few weeks, following the reconciliation process between the House and Senate versions of the bill. The ENABLERS Act, which passed in the House version of the NDAA but fell short of inclusion in the Senate amendment process, will face its final hurdle in conference committee.
UK moving ahead on global minimum corporate tax as new evidence of continued corporate tax-dodging comes to light from the OECD
The UK is set to become the first G-7 adopter of the global minimum corporate tax outlined in the OECD Inclusive Framework’s two-pillar tax deal, leading the charge towards reversing the race-to-the-bottom corporate tax rate competition that has emerged over the past two decades.
In a budget document released on November 17, the UK government outlined their plans to implement Pillar 2 of the OECD deal, levying top-up taxes on companies – both those doing business abroad and those operating only domestically – with effective tax rates lower than 15%. These new policies will be attached to the Spring Finance Bill set for early 2023, and if passed will take effect in 2024.
The UK also intends to implement the backstop Undertaxed Payments Rule (UTPR) for taxable years beginning in 2025. Doing so will prevent MNEs from avoiding these taxes by moving their headquarters out of the UK–as well as increase revenues for the UK so long as jurisdictions like the United States continue to fail to implement Pillar 2 in a timely manner.
The same day as the UK’s announcement, the OECD released a new report detailing evidence of the continuing and extensive base-erosion and profit-shifting (BEPS) being practiced by large MNEs to minimize their average effective tax rates.
With a lame-duck Congress on the horizon in the U.S., tax policy is likely one of a scant few issues that may see substantive progress in the coming months. Republicans are trying to avoid upcoming corporate tax increases that were put in place as revenue raisers to pay for tax cuts included in the Tax Cuts and Jobs Act of 2017. Among other items, upcoming changes meant to limit business interest deductions in light of abusive practices that include U.S. tax base erosion are in jeopardy of being rolled back. Meanwhile, Democrats are eager to preserve the expanded Child Tax Credit (CTC).
In these negotiations, conversations around international tax impacts should not be ignored. With movement by the UK, and continuing pledges from France and Germany among others to implement Pillar 2 regardless of EU action, the U.S. is leaving revenue on the table if it does not move to fully implement Pillar 2 – revenue that could help fund permanent expansion of the CTC and other popular programs.
Latest from FACT
|Comment Letter: FACT Submits Recommendations to Treasury about Combating Illicit Finance in Digital Assets
November 3: The FACT Coalition praised Treasury’s commitment to tackling illicit finance and national security threats associated with digital asset technologies, and submitted recommendations encouraging the application of strong AML, CFT and reporting requirements for the digital asset ecosystem. From FACT’s comments: “Digital asset proponents often praise the public nature of blockchains as a way to minimize fraud, increase efficiencies, lower costs, and ensure fair dealing, but the facts show that too many blockchain operators and users work to develop and exploit digital asset technologies that conceal their identities and digital transactions.”
FACT in the News
|Quoted In: Business group sues over new corporate ownership database
On November 14, Ian Gary, FACT’s executive director, was quoted in an article by Fatima Hussein of the Associated Press, reacting to a suit filed by the National Small Business Association attempting to block the implementation of the first final rule of the Corporate Transparency Act (CTA). Gary reasserted the value of the strong final rule, and of the CTA as a whole, saying that the law “will protect our financial system and small businesses from the criminal abuse of anonymous shell companies.”
|Quoted In: Billion Dollar Tax Cheats Require a Healthy Dose of Sunlight
On November 9, The FACT Coalition was cited by Don Griswold for Bloomberg Tax as one of the key drivers of the continued push for greater tax transparency from multinational corporations engaged in profit shifting and base erosion.“In recent decades, public interest organizations—such as the Transparency International, Global Financial Integrity, FACT Coalition, and Tax Justice Network—have labored to shine sunlight on the tax practices of huge multinational entities that siphon significant resources that properly belong to the people. Compulsory country-by-country reporting of MNEs’ tax and business activity is an important fruit of their labor.”
|Quoted In: Australia Considers Groundbreaking Tax Transparency Law
FACT’s previous Just the Facts newsletter was quoted in a piece from the Organized Crime and Corruption Reporting Project (OCCRP) on Australia’s new PCbCR proposal. “If the proposal is enacted into law through legislation – as seems likely, given Australia’s parliamentary makeup – Australia will become the first country to require a wide range of MNEs (multinational enterprises), including some headquartered in the United States, to report key tax and operating information that is fully disaggregated on a country-by-country basis,”
|Quoted In: Australia aims to force corporations to Report Which Countries They Pay Taxes To
On November 8, FACT Coalition Ian Gary and Policy Director Ryan Gurule were quoted in an article published by the International Consortium of Investigative Journalists (ICIJ) commending Australia’s move to enact a framework requiring public country-by-country reporting to the benefit of investors, policymakers, and other users of financial data.
|Quoted in: Midterms Unlikely to Revive Debate Over Int’l Taxes in US
FACT Policy Director Ryan Gurule was quoted in a story by Dylan Moroses for Law360 discussing the potential for international tax reform legislation during the upcoming congressional lame duck session.“Whoever is in power after the election is going to be facing pressure to address expiring tax cuts from the Tax Cuts and Jobs Act,protect popular social spending provisions in the tax code, and navigate international tax reform efforts that seem to be happening with or without the United States that will impact U.S. multinationals.”
Recent and Upcoming Events
|December 6-10: Uprooting Corruption, Defending Democratic Values
Register to attend the International Anti-Corruption Conference (IACC), the preeminent global conference bringing together heads of state, community activists, non-profits, high-level policymakers, businesses, policy experts, and academics to address the increasingly complex challenges posed by corruption.
|December 6: Public Consultation on FATF Guidance on Beneficial Ownership (Recommendation 24) and Transparency and Beneficial Ownership of Arrangements (Recommendation 25)
The Financial Action Task Force (FATF) is seeking feedback from nonprofit organizations and other relevant stakeholders on recently proposed guidance for Recommendation 24 and Recommendation 25, which together establish best practices around transparency and beneficial ownership information reporting for corporations, trusts, and other legal entities and arrangements. Feedback on the Guidance paper to Recommendation 24 and Recommendation 25 will be accepted until December 6, 2022.
Social Media Shoutouts
@ALeighMP, It’s good to see Australia’s multinational tax transparency measures helping advance the global debate @FACTCoalition @TaxJusticeNet https://thefactcoalition.org/australia-advances-public-country-by-country-reporting/ #auspol
@RepMalinowski, Tom is still fighting for Ukraine. Congress is going to make sure Putin and other dictators can’t make money off the backs of hardworking Americans. Read more here ⬇️https://t.co/8YTTAwi3gB
@SenWhitehouse, American professionals should not be helping sanctioned Russian oligarchs stash away their ill-gotten gains. @RepMalinowski and I are leading the bipartisan charge to close loopholes that allow foreign kleptocrats to launder dirty money in the U.S.
About the FACT Coalition