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Taxing Offshore Profits and Domestic Profits Equally Could Curb Corporate Tax Dodging

In recent days, presidential candidates Sen. Kamala Harris and New York Mayor Bill DeBlasio have called for taxing corporate profits the same whether they are earned in the United States or abroad. These calls echo the position of Sen. Bernie Sanders, who has long had a proposal along these lines. As ITEP has explained, correcting this inequity is not a mere detail but rather a sweeping reform that could end incentives for companies to shift profits and jobs offshore.

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How North Korea Abuses Anonymous Companies to Illicitly Procure Mercedes — and Weapons

The images of Chinese President Xi Jinping and Kim Jong-un waving from atop a Mercedes Benz limo have made the rounds on the internet over the past few days in the wake of a new study published by the Center for Advanced Defense Studies (C4ADS) and covered by the New York Times and CNN, among others. C4ADS research details how North Korea has evaded sanctions to secure luxury goods — and other more nefarious items — through its illicit finance operations.

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CEOs, Multinationals, and Small Businesses to Congress: End Anonymous Companies

Business Support Continues to Grow for Corporate Ownership Transparency
A group of CEOs from major companies, a trade association of major multinational enterprises, and a small business trade group each called on Congress over the past week to end the abuse of anonymous shell companies, adding to the momentum to enact corporate ownership transparency legislation.
CEOs
A dozen current and former CEOs from major corporations (including Allianz, Chobani, Danone, Kering, and Unilever) sent a letter to Congress on Tuesday calling on lawmakers to end anonymous shell companies by enacting the bipartisan Corporate Transparency Act of 2019.

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Tax Day Highlights Broken Promises and a Need for Transparency

On Tax Day 2019, the first year of data on corporate taxes under the Tax Cuts and Jobs Act (TCJA) are coming in.  Those who championed the corporate reforms promised, among other benefits, that the changes would end the offshore shell games by multinationals, profits stashed in tax havens would return to the U.S., and the new competitive rate would attract a flood of foreign direct investment.

Opponents of the new law, like the FACT Coalition and our members, argued that the incentives would have the opposite effect: the offshoring of profits would continue and the incentives might well create new (unhelpful) distortions influencing corporate behavior.

It is now time to look at what actually happened.  To get a better sense of the impact, consider the following recent excerpts from various news reports and analysis by tax experts.

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Rep. Doggett and Sen. Whitehouse Reintroduce Bill to End Offshore Tax Avoidance

Last Thursday, Representative Lloyd Doggett and Senator Sheldon Whitehouse announced that they are reintroducing the “No Tax Breaks for Outsourcing Act.” Our international corporate tax rules have been a mess for a long time, and the Tax Cuts and Jobs Act (TCJA) failed to resolve the problems. The old rules and the new rules under TCJA both tax offshore corporate profits more lightly than domestic corporate profits, but in different ways. The No Tax Breaks for Outsourcing Act would create rules that tax domestic profits and foreign profits in the same way.

The old rules allowed American corporations to defer paying taxes on their offshore profits until those profits were officially brought to the U.S., which in many cases was never going to happen. The new rules, under TCJA, are also problematic because they exempt certain offshore profits and tax other offshore profits at just half the rate imposed on domestic profits.

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Will They Listen to What They Hear?

This Wednesday, March 13th, the House Financial Services Committee’s subcommittee that covers national security issues will hold a hearing on corporate transparency and efforts to fight money laundering.  They will once again discuss a proposal to collect the ownership information (a.k.a. beneficial ownership) of companies when they are formed in the United States.  Currently, no state collects this information, and the anonymity has opened the door to a vast array of bad actors that endanger our communities and threaten our national security.  More on that later.

The Committee is to be applauded for raising these important issues.  Let’s only hope that, this time, they listen to what they hear.

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