Blog

New Legislation Would Close Significant Offshore Loopholes in the Tax Cuts and Jobs Act

By Richard Phillips

The Tax Cuts and Jobs Act (TCJA) was a historic opportunity to reform the international tax code and finally put an end to the rampant shell games played by U.S. companies to avoid taxes. Unfortunately, the TCJA will likely increase offshore tax avoidance and increase the incentives for companies to move jobs and operations offshore. As a new ITEP report explains, TCJA creates many new breaks and loopholes for offshore corporate profits, and while several different bills have been introduced to close them, no one bill addresses all of them.

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Facebook Facing Shareholder Scrutiny for its Offshore Tax Avoidance

By Richard Phillips

In recent months, Facebook CEO Mark Zuckerberg has been hauled before lawmakers in the United States and the European Union to respond to criticism of the company’s privacy policies and sharing of user data. Now the company’s dodgy tax practices are facing increased scrutiny from an even more important source: some of its own shareholders. In advance of its annual shareholders meeting on May 31, Facebook was confronted with a shareholder resolution (Proposal 8 on pg. 59) asking it to endorse a set of principles to guide its tax policy and to ensure that such principles consider the impact of its tax strategies on local economies and public services. The resolution is a signal from a group of concerned shareholders that Facebook’s tax avoidance hurts its reputation, the communities in which it operates, and creates financial risks to the company’s shareholders.

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There Is No Evidence That the New Tax Law Is Growing Our Economy or Creating Jobs

By Steve Wamhoff

Last week, the House Ways and Means Committee held a hearing on the Tax Cuts and Jobs Act (TCJA). Proponents of the law used the occasion to tout its alleged economic benefits and argued that its temporary provisions should be made permanent. The title of the hearing was “Growing Our Economy and Creating Jobs,” but there is little evidence that the law does either of these things.

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New UK Law May Shut Down the Biggest Tax Havens — Aside from the U.S.

By Steve Wamhoff

The United Kingdom’s parliament has enacted a new law requiring its overseas territories — which include notorious tax havens like Bermuda, the Cayman Islands, and the British Virgin Islands — to start disclosing by 2020 the owners of corporations they register.

This could shut down a huge amount of offshore tax evasion and other financial crimes because individuals from anywhere in the world, including the United States. have long been able to set up secret corporations in these tax havens to stash their money.

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Key Takeaways from John Oliver’s Segment on Corporate Tax Avoidance

By Richard Phillips

The HBO television show Last Week Tonight with John Oliver has become known for its longer segments that examine important issues facing the country. In its latest segment on Sunday, the show took a deep dive into corporate taxes and how many companies manage to avoid paying their fair share. Between its hilarious interludes, the segment painted a striking portrait of problems in our corporate tax code and how the Tax Cuts and Jobs Act (TCJA) failed to address them. Here are some key points.

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As Opioid Crisis Evolves, Anonymous Company Loopholes Remain a Gap

By Nathan Proctor

Our 2016 report, Anonymity Overdose, charted the connection between the opioid epidemic and the problem of anonymous shell companies.

As Congress ramps up funding for the national response to this crisis (though not at the levels some had hoped for), we wanted to provide an update on how the opioid trafficking operations are changing, and why ending anonymous shell companies is still an incredibly low-cost, bipartisan approach to help take on the opioid crisis.

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Priced Out: How Anonymous Companies Contribute to the Rising Cost of Housing

By Claire Coleman

Home ownership is a quintessential part of the American dream. Now, nearly a decade after the housing market crash this dream for many Americans is still just that: a dream. Housing costs are rising far faster than wages—burdening renters.   Residential properties are becoming prohibitively expensive—forcing out residents who may have called them home for decades.

To add insult to injury, the loss of affordable housing has been spurred by the use of anonymous shell companies. Bad actors or rich speculators use these companies to bid up prices on properties and then use them as a “bank” rather than a home—all without identifying who they are or where the money came from to purchase the property.

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New Legislation Would End Tax Incentives to Move Jobs and Profits Offshore

By Richard Phillips

New legislation introduced today, the No Tax Breaks for Outsourcing Act, by Rep. Lloyd Doggett (D-TX) and Sen. Sheldon Whitehouse (D-RI) would help repair the damage to the international tax code wrought by the new tax law and move toward a system where U.S. corporations can’t reap tax benefits from shifting jobs and profits offshore.

One of the biggest problems with the United States tax code is that it encourages multinational corporations to artificially shift their profits offshore, or even shift real investments and jobs offshore, to avoid paying taxes. A real tax reform would have put an end to tax avoidance and the tax incentives for offshoring, but the Tax Cuts and Jobs Act (TCJA) made both of these problems worse.

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The Flawed and Flimsy Basis for the American Bar Association’s Opposition to Anonymous Company Reform

By Matthew Stephenson

In last week’s post, I raised the question of why the American Bar Association (ABA), which represents the U.S. legal profession, so strenuously opposes even relatively modest measures to crack down on the use of anonymous companies for money laundering and other illicit purposes. In particular, the ABA has staked out a strong, uncompromising opposition to the bills on this topic currently under consideration in the U.S. House (the Counter-Terrorism and Illicit Finance Act) and in the Senate (the TITLE Act). As I noted in my last post, the substance of the ABA’s objections (summarized in its letters here and here) appear, at least on their surface, unpersuasive as a matter of logic, unsupported by evidence, or both. This, coupled with the fact that many ABA members strongly disagree with the ABA’s official position on this issue, made me wonder how the ABA’s President and Government Affairs Office had come to take the position that they had.

After doing a bit more digging, and talking to several knowledgeable people, I have a tentative answer: The ABA’s opposition to the currently-pending anonymous company bills is based on an aggressive over-reading of a 15-year-old policy — a policy that many ABA members and ABA committees oppose but have not yet been able to change, due to the ABA’s cumbersome procedures and the resistance of a few influential factions within the organization.

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Why Does the American Bar Association Oppose Beneficial Ownership Transparency Reform?

By Matthew Stephenson

Compared to the more aggressive beneficial ownership transparency reforms touted by anticorruption/AML advocates, and adopted in some other countries, the proposed U.S. legislation is fairly mild—but it is still, as prior commentators on this blog have emphasized (here and here), a welcome step in the right direction. After all, while the U.S. record on fighting global corruption and international money laundering is good in some respects (Foreign Corrupt Practices Act enforcement and the Kleptocracy Asset Recovery Initiative come to mind), when it comes to addressing the facilitators of corruption, such as corporate secrecy, the U.S. is a laggard (as illustrated by poor U.S. score on the Tax Justice Network’s 2018 “Financial Secrecy Index,” released last month). So it’s indeed encouraging that the TITLE Act, and its counterpart in the U.S House of Representatives (the less-cleverly-named “Counter Terrorism and Illicit Finance Act”) have received both bipartisan support and the endorsement of a wide range of interest groups—including not just anti-corruption, AML, and tax justice advocacy groups, but also representatives of law enforcement, the finance industry and other business interests (here and here). Many are cautiously optimistic that some version of these bills might actually become law this year.

But some opposition remains. The sources of that opposition are, in some cases, predictable: the Chamber of Commerce, for example, opposes these reforms, as does FreedomWorks, the lobbying group sponsored by the libertarian billionaire Koch brothers. One of the major opponents of the legislation, though, was more surprising, at least to me: the American Bar Association (ABA), which represents the U.S. legal profession. The ABA has come out strongly against this legislation, sending letters to the responsible committees in both the House and Senate expressing strong opposition to even these relatively mild reforms.

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