Congress Finally Stands up to Tax Dodgers, but International Tax Loopholes Persist: Just the FACTs: August 24

“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

Congress Finally Stands up to Tax Dodgers, but International Tax Loopholes Persist

On August 16, President Biden signed the Inflation Reduction Act (IRA) into law. The IRA, among other things, creates a corporate alternative minimum tax (CAMT). The CAMT applies a 15 percent minimum tax on the largest corporations worldwide, aggregate “book” income, adjusted for certain identified tax preferences. Notably, the CAMT has several key differences when compared to the global minimum corporate tax that would be created by Pillar 2 of the OECD’s two-pillar solution agreed to by 137 jurisdictions last October. For example, the CAMT does not apply country-by-country, thereby increasing the incentive to offshore investment and shift profits away from the United States, and will apply to far fewer companies. 

The FACT Coalition will continue to fight for international tax reforms left out of the Inflation Reduction Act that would more definitively remove the incentive for large multinationals to shift profits offshore or erode the U.S. tax base. We continue to push for a framework that will permanently end tax dodging through profit shifting and base-erosion practices by multinationals. 

Beyond the CAMT, the IRA will also provide $80 billion in additional funding to the Internal Revenue Service (IRS) over the next decade to facilitate their operations and provide more resources to cut down on tax dodging by the rich and multinational corporations.

Momentum Builds to Bring Anti-Money Laundering Obligations to Professional Gatekeepers

The bipartisan ENABLERS Act, initially introduced in October 2021 in response to the Pandora Papers, is finally back on the frontline, paving a way to hold financial service providers responsible for knowing with whom they are working. As Scott Greytak, of FACT member Transparency International-US, told Reuters last week, “This is the most consequential anti-money laundering and anti-corruption law passed since 9/11, and it meets the immediate moment of being able to track, detect, and prevent dirty money from flowing into the country.”

In this podcast, FACT’s Erica Hanichak and Scott Greytak of Transparency International-US delve into this comprehensive reform measure intended to reduce money laundering through professional U.S. gatekeepers. Additionally, the Coalition signed a letter of 23 organizations to the Senate supporting the bill, highlighting its great importance in shaping financial transparency and accountability while curbing corruption and illicit financial flows.

FACT in the News

FEATURED IN: Stakeholders Push FATF for Centralized Beneficial Ownership Trust Registers
August 22: The FACT Coalition’s submission to the Financial Action Task Force (FATF) was featured in a recent Tax Notes analysis of suggested changes on the FATF’s Recommendation 25, governing beneficial ownership disclosures for trusts and other legal arrangements. FACT was one of several organizations, including Open Ownership and Transparency International, to recommend that FATF take a tougher stance in encouraging trust transparency when it considers the issue during its forthcoming meetings in October.
PODCAST: August 14: The FACT Coalition’s Erica Hanichak and TI-US’s Scott Greytak join Michael Volkov on “Corruption, Crime, and Compliance” to delve into a deep analysis of the ENABLERS Act and its prospects in Congress. The pair also raises the need to adequately fund the Financial Crimes Enforcement Network (FinCEN) to bring U.S. anti-money laundering laws into the 21st century.

Recent and Upcoming Events

September 14: Register for this ACAMS webinar, “Following the Illicit Money Flows and Shell Companies that Robbed 1MDB”. Tune in to learn from Lakshmi Kumar, of FACT-Coalition member Global Financial Integrity (GFI), to understand how dirty money moves through anonymous entities, real estate, and other high-value assets in the U.S.

Social Media Shoutouts

@DanRather: You know what scares unscrupulous rich people more than taxes? An emboldened IRS with enough resources to catch big-time tax cheats. All this fear-mongering is a smokescreen to protect those who refuse to pay their fair share.

@amyhanauer: If you don’t cheat on your taxes, then what the increased IRS funding means for you is: $200-$400 billion more for a better planet. And the IRS should have the staffing to answer your questions.

@iteptweets: “So just to be clear: the audits will be focused on wealthy tax cheats and corporate tax evaders, routine audits are done through the mail, the 87,000 new IRS staff are to be added over a decade…”

About the FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan coalition of more than 100 state, national, and international organizations working toward a fair and honest tax system that addresses the challenges of a global economy and promotes policies to combat the harmful impacts of corrupt financial practices.
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