“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 the laundering of money through the financial system.
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Here’s the State of Play
Tax Loopholes and Tax Transparency
Congress’ Moment to Pass International Tax Reform
Following last month’s historic agreement on a 15 percent global minimum tax rate at the G7 Finance Ministers meeting, a groundbreaking 130 countries came together to All eyes are on Washington to see if lawmakers will take a proactive step toward codifying U.S. international tax reform through the budget reconciliation process. The Organization for Economic Cooperation and Development (OECD) is concurrently slated to finalize an international two-pillar agreement to implement a global minimum corporate tax in October, but negotiations are ongoing to convince hesitant tax-haven jurisdictions and low and middle income economies in need of corporate tax revenues to fuel a fair recovery that the OECD deal is worth the commitment. In this critical moment, a positive signal from Congress now through U.S. international tax reform consistent with anti-tax abuse principles could make the difference between a deal and no-deal.
Beyond compelling international negotiations to the finish line, U.S. international tax reform could also make for a big revenue raiser and good policy for American jobs as Christopher Boose points out in FACT’s latest blog post. The reforms could rake in well above one trillion dollars, according to the Biden administration’s estimates. Thse tax moves are also popular among voters who are frustrated as dozens of profitable corporations continue to pay no taxes as highlighted by a recent ITEP report. As the Senate searches for revenues to help fund up to $3.5 trillion in critical investments in infrastructure, healthcare, the fight against climate change, and anti-poverty measures, capitalizing on momentum for international tax reform to raise revenue would help support President Biden’s ambitious agenda. As Congress navigates the technical details and timing of international tax reform, FACT remains committed to equipping lawmakers with the information and arguments to help see these crucial reforms through.
As Congress moves to reform international tax and raise revenue for infrastructure and other investments, lawmakers are navigating a changing global economy. Attention should be paid to the ways that this changing economy might lead to new gaps for tax avoidance and evasion, undermining the ability to effectively raise revenue in light of pressing global challenges and helping to fuel international corruption and illicit financial flows. To that end, FACT’s Policy Director, Ryan Gurule, recently shared his thoughts on the burgeoning debate regarding cryptocurrency tax reporting in a blog post elevated by Sen. Mark Warner, advising lawmakers to tread cautiously on digital asset reporting exceptions.
Tax Transparency Progress Continues Behind the Scenes
The FACT Coalition is continuing to lead the charge for public country-by-country tax reporting, and a recent blog from FACT-member Public Citizen’s Robert Stewart notes the pressing need for reform to provide this decision-critical information to investors, legislators and the public. Meanwhile, the Financial Accounting Standards Board (FASB) is soliciting broad stakeholder feedback on the organization’s priorities.
As the overseer of the Generally Accepted Accounting Principles, FASB could bring about widespread adoption of public country-by-country reporting to support investors’ ability to assess reputational and regulatory risks in their portfolios. FACT looks forward to rallying investors and other stakeholders to submit comments ahead of the impending September 22 deadline.
Fighting Illicit Financial Flows
A Landmark Report on Real Estate Money Laundering
“What do the Iranian government, a fugitive international jeweler, and a disgraced Harvard University fencing coach have in common? They have all used U.S. real estate to launder their ill-gotten gains,” according to FACT member Global Financial Integrity (GFI) in a major new report. The publication digs into the role of the United States and other G7 countries in facilitating the global illicit financial flows through real estate, finding that at least $2.3 billion has been laundered through U.S. real estate in only the last five years, all while white collar enablers have looked the other way.
The report outlines several key improvements the Administration could make toward mending this gaping hole in our anti-money laundering regime, such as expanding the role of geographic targeting orders (GTOs), a key tool in discouraging real estate money laundering, to cover all real estate purchases in the U.S. In doing so, the Administration could live up to the bold words it put forward on fighting corruption at the G7 meeting earlier this year, where President Biden joined other world leaders in highlighting the crisis of real estate money laundering in a joint communique.
Strong action from the United States now would also set the stage for President Biden’s recently scheduled Summit for Democracy. Slated for December 9-10, the virtual conference of government, civil society, and private sector leaders will convene with corruption as one of their key goals. FACT welcomed the news while encouraging the U.S. to follow through on other anti-corruption promises, including fully implementing the Corporate Transparency Act (CTA), ahead of the summit.
A Stark Reminder of the Need for Comprehensive Beneficial Ownership Regulation
The swift takeover by the Taliban of the Afghanistan government has offered another stark reminder of the importance of fighting corruption and illicit financial flows. As was documented by US government agencies such as the Office for the Special Inspector General for Afghanistan Reconstruction and by researchers such as Sarah Chayes and global anti-corruption advocates such as Casey Michel, rampant kleptocracy and corruption had strengthened the hands of Taliban fighters and sapped popular support for the government. This kleptocracy was abetted by the use of anonymous shell corporations. A 2016 report by Global Witness found that shell companies have siphoned off as much as 25 percent of government spending in fragile states is illicitly diverted into the hands of U.S.. Anonymous shell companies help facilitate this diversion and in at least one instance US government funds ended up with contractors anonymously owned by Taliban affiliates.
It is time for the U.S. to strengthen its own financial system and boost national security by instituting comprehensive beneficial ownership reform to further deny tools to actors such as the Taliban.
The Congressionally mandated January 2022 deadline to finalize CTA implementation is drawing near. The Treasury still has a large task ahead to finalize regulations to end anonymous shell companies in the U.S. in the coming months, and recent events only underscore the real world importance of their work. Amid new acting leadership at FinCEN, it is imperative that FinCEN deliver a strong rule in line with the expectations of anti-corruption advocates such as FACT.
An effective rule could also send a needed international signal. The Financial Action Task Force (FATF) recently concluded a public consultation on their beneficial ownership guidelines. FACT and coalition member GFI submitted comments to advocate for guidelines that would mandate up-to-date, centralized, and accessible registries.
Latest from FACT
|PRESS RELEASE: FACT Coalition Welcomes White House Plans for “Summit for Democracy”|
August 11: The Financial Accountability and Corporate Transparency (FACT) Coalition welcomed the White House announcement today of a “Summit for Democracy” from December 9-10 bringing together global leaders from governments, civil society, and the private sector.
|BLOG: Congress Must Seize Rare Moment to Pass Needed International Tax Reforms|
August 10: FACT’s Christopher Boose sums up the urgent case for including international tax reform in the reconciliation package.
|FACT SHEET: The Urgent Case for U.S. International Tax Reform|
August 6: Concerns about competitiveness and how the OECD negotiations may interact with U.S. international tax reform are overstated—or, worse—purposefully misleading.
|BLOG: Congress Should Tread Cautiously with Digital Asset Reporting Exceptions|
August 5: FACT’s Ryan Gurule explains why Congress should be cautious in broadly excluding certain actors or transactions from digital asset reporting requirements.
|PRESS RELEASE: FACT Coalition Mourns the Passing of Senator Carl Levin|
July 30: The Financial Accountability and Corporate Transparency (FACT) Coalition mourned the passing of Senator Carl Levin of Michigan. Levin used his powerful position to investigate money laundering, tax avoidance and evasion, and the many ways in which corrupt actors abuse the U.S. financial system for personal gain.
FACT in the News
|QUOTED IN: Sen. Mark Warner highlights FACT as Crypto Tax Leader|
August 11: Senator Mark Warner elevates FACT’s Ryan Gurule’s thoughts on digital asset tax reporting exemptions
Social Media Shoutouts
@MarkWarner, My colleagues’ amendment to the underlying bill would – in the eyes of @FACTcoalition – actually take a step *backwards* in key respects, including (in @FACTcoalition’s eyes) undermining the bipartisan AML law Congress enacted law year.
@SenWarren, It’s time for the rich and powerful to start paying their fair share. That’s why I’m fighting for a #WealthTax on the ultra-rich, a Real Corporate Profits Tax on giant corporations, and stronger IRS enforcement to go after wealthy tax cheats.
About the FACT Coalition