Blog

House Attempts to Repeal Bipartisan Anti-Corruption Safeguard in Controversial Move

By Clark Gascoigne

Rolling Back Extractives Transparency Measure Could Hamper National Security

Lawmakers in the House of Representatives are expected to introduce a controversial resolution to repeal a bipartisan anti-corruption safeguard, in a move panned by non-partisan anti-corruption experts.

Former Sen. Richard Lugar (R-IN) and Sen. Ben Cardin (D-MD) sponsored the Energy Security Through Transparency Act, as an amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The provision protects U.S. national security and combats corruption in developing countries (particularly those plagued by extremist violence and conflict) by requiring oil, gas, and mining companies which report to the Securities and Exchange Commission to publicly report all payments made to host-governments.

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Tax Haven Abuse: The Burden of the Middle Class

By Jacob Wills

On Tax Reform, Congressional Leaders Propose Widening Loopholes for Multinationals at Expense of Domestic Businesses and Middle Class Taxpayers

Much of the analysis of the 2016 election reflects on a middle class that feels overburdened.  While the economy has certainly improved since the recession, one thing has gotten worse that may be partially to blame—offshore tax haven abuse.  A new report from U.S. PIRG Education Fund finds that multinational companies dodge an estimated $147 billion in federal and state taxes annually through offshore tax haven loopholes, shifting that burden instead onto small businesses and individual taxpayers.  Titled “Picking Up the Tab 2016: Small Businesses Bear the Burden for Offshore Tax Havens,” the study estimates that each small business, on average, owes $5,186 more on its annual tax bill to collectively make up for the federal and state corporate tax revenue lost to offshore tax havens.

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“Welcome to My World” — My Trip to Panama

By Gary Kalman

On International Anti-Corruption Day, We Must Better Understand the Extent to Which Corruption Harms Individual Lives and Entire Communities

Last week, I attended the International Anti-Corruption Conference held in Panama City (an irony not lost on anyone). Riding the bus to the convention center, I spoke with an anti-corruption advocate from Guatemala.  She was eager to hear about the impact of the U.S. election on our work and what it means for American engagement in multilateral discussions on transparency and anti-corruption initiatives.

We discussed the large and multiple conflicts between the incoming President’s public responsibilities and his private business interests.  I mentioned a recent article about how a banking lobby already moved their events for the coming year to one of Trump’s Washington area hotels, presumably to curry favor.  Another article detailed a leasing agreement between the federal government and Trump enterprises, effectively making the incoming President his own landlord.  Not even in office, and the list of conflicts of interest and potential conflicts is long.

Her reaction: “Welcome to my world.”

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Global Task Force Slams U.S. on Anonymous Shell Companies

By Clark Gascoigne

FATF Evaluation Notes the U.S. Anti-Money Laundering “System Has Serious Gaps that Impede Timely Access to Beneficial Ownership Information”

Last week, the Financial Action Task Force (FATF)—the international body that sets anti-money laundering and counter-terror financing (AML/CFT) standards—released its first review of the United States’ efforts to combat dirty money since 2006.  While the FATF report finds that the U.S. generally has a decent AML/CFT framework, it notes that there remains a gaping hole in the regime: the problem of anonymous shell companies.

The FATF release states:

“The United States has a well-developed and robust anti-money laundering and counter-terrorist financing (AML/CFT) regime through which it is effectively investigating and prosecuting money laundering and terrorist financing. However, the system has serious gaps that impede timely access to beneficial ownership information.”

Indeed, the U.S. remains one of the easiest places in the world for criminals, terrorists, and kleptocrats to open anonymous shell companies to launder illicit money with impunity, according to leading academics.  That is because no U.S. state requires that information on the true, human owner (known as the “beneficial owner”) of an entity be disclosed to authorities at the time of incorporation.

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Level the Playing Field: Tax Reform Americans Deserve

By Gary Kalman

As Congress Pursues Tax Reform, FACT Urges Lawmakers to Close Loopholes, Hold Large Companies Accountable, and Refrain from Disadvantaging Wholly Domestic and Smaller Businesses

Corporate tax reform is coming.  The central question is: what will it look like?  After a campaign in which both presidential candidates pledged to close loopholes that allow corporations to dodge taxes and stop companies from booking their profits overseas, is there the political will to do it?

One current proposal in Congress calls for a 0% tax on profits booked offshore.  Yes, the proposal is for 0%. That is not a typo.  Given the campaign rhetoric, that seems antithetical to cracking down on corporate tax dodging. But that hasn’t stopped Representative John Delaney (D-MD) from pushing a bill that would do just that.  Bad enough that House Speaker Paul Ryan (R-WI) and the President-elect have suggested giveaway-corporate-tax rates of between 8% and 10% on offshore profits — but the new starting point appears to be zero.

Sadly, the rate is only a part of the problem and, in some ways, the lesser of the evils. These proposals leave in place all of the loopholes that enable companies to move money and jobs overseas. They allow multinational companies to continue to defer paying taxes on profits booked offshore until the next giveaway — referred to in policy circles as a tax ‘holiday.’  These ‘holidays’ reward a small number of very large corporations — just 30 Fortune 500 companies hold 65% of the estimated $2.6 trillion in offshore profits — with a special tax rate (or no tax rate).  That leaves domestic companies, smaller businesses, and individuals to pick up the tab (and, it’s a large tab: Citizens for Tax Justice estimates that Fortune 500 companies now owe more than $700 billion in unpaid taxes on their earnings booked offshore).

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Ask the Government to Know Who It Does Business with to Protect Us All

By Eryn Schornick

25 Organizations Send Letter to Congress Urging Beneficial Ownership Transparency in Procurement Process

The U.S. government has long recognized that it does not have enough information on the identities of its contractors—those that help protect our national security, provide medical and educational services, and build infrastructure.

“‘[T]here is no database in the U.S. government’ that provides reliable subcontractor information.”

— Ray DiNunzio, Special Investigator General for Afghanistan Reconstruction chief investigator from August 2009 to 2011 (via the Washington Post)

This lack of information can harm us all.

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Hudson Institute Highlights Links Between Criminal Secrecy and Kleptocracy

By Jacob Wills

Conservative Think Tank Scholars Note “Ending Criminal Secrecy Might become that Rarest of Political Beasts: a Truly Non-Partisan Issue.”

Scholars at the Hudson Institute recently announced in an article their support for action to curtail the abuse of anonymous shell companies.  The conservative think tank’s Kleptocracy Initiative argues that the U.S. efforts around the world to stabilize governments and root out corruption are being undermined by an irrational contradiction where U.S. laws are at the same time providing a “safe haven to their dirty cash.”

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Tackling the Opioid Epidemic through Corporate Transparency

By Waiyan Tse

Ending Anonymous Shell Companies Will Enable Us to Follow the Money Driving the Illicit Opioid Trade

Opioids are killing more Americans than ever before.

On average, 78 people die from opioid overdose everyday. From 1999 to 2014, more than 165,000 lives were lost due to overdoses related to prescription opioids. This crisis is being described as “one of the worst public health epidemics” in U.S. history.

The prevalence of opioid abuse is pushing families apart, tearing at the fabric of our communities, and killing our loved ones. So what or who is to blame for this prevalence? What is allowing opiates to be transported into the heart of our communities? There are a number of reasons, but a recent report published by Fair Share Education Fund reveals one of the less-discussed—yet systemic—drivers of opioid abuse: anonymous shell companies.

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Apple Ruling Puts Emphasis on Need to End ‘Deferral’—the Biggest Tax Dodge

By Clark Gascoigne

Administration and Congress Should Focus on Collecting the Remaining $51.5 Billion that Apple Owes American Taxpayers

U.S. corporations woke up today to find that the European Commission ruled that Apple must re-pay Ireland roughly $14.5 billion it provided in illegal tax breaks.

According to The Wall Street Journal:

The European Union’s antitrust regulator has demanded that Ireland recoup roughly €13 billion ($14.5 billion) in taxes from Apple Inc., after ruling that a deal with Dublin allowed the company to avoid almost all corporate tax across the entire bloc for more than a decade—a move that could intensify a feud between the EU and the U.S. over the bloc’s tax probes into American companies.

With all of the finger pointing and spin, it’s important to take stock of the facts.

Let’s be clear—Apple’s pretense that it is a good corporate citizen that pays its taxes is now over.

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TRACEpublic: A Step Towards Beneficial Ownership Transparency

By Robert Clark

Anonymous shell companies are impressively flexible tools. They can be used to launder money, evade taxation, covertly channel the payment of bribes, stash away a nation’s stolen wealth, and facilitate trafficking in drugs, weapons, and human beings. It’s a challenge to grasp the scale of the harm they help bring about.

It’s also challenging to find an appropriately scaled response. One place to start is for governments to require all companies within their jurisdiction to disclose their beneficial ownership for inclusion in a central registry—a step already taken by the United Kingdom, Denmark, and Norway. Going further, data from such registries can be aggregated and combined with other public registration materials to produce a gigantic database of company information, such as the one maintained by the UK for-profit OpenCorporates’ project.

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