“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
International Community Strikes Historic Tax Deal
The FACT Coalition, along with its allies in the global tax justice movement, have been pushing for new global rules to combat tax dodging by multinational corporations which costs developed and developing countries hundreds of billions of dollars in lost revenues every year. This weekend, G-20 leaders formally adopted the new Organization for Economic Cooperation and Development (OECD) framework that represents an historic breakthrough to combat profit shifting and aggressive tax dodging by some of the world’s largest corporations. The OECD global framework, endorsed by 136 of 140 jurisdictions, will reallocate taxing rights to some profits of the world’s largest multinationals to “market” jurisdictions and create a global minimum corporate tax for large multinational corporations equal to 15%. Subsequent to its adoption, governments will then have to turn to implementing the agreement in large part by 2023, which will involve addressing open technical questions and navigating domestic politics.
The Framework comes as an investigative journalist consortium revealed the Pandora Papers earlier in the month, demonstrating once again how the extremely affluent, world leaders, may participate in a distinct and covert “offshore” financial sector. By encouraging profit-shifting and offshoring, the current global regime for taxing multinational corporations (MNEs) currently encourages MNEs to take advantage of, empower, and legitimize the “offshore” financial sector, as well, as the FACT Coalition has previously written. These systems encourage tax evasion, corruption, and illegal financial flows. They also deprive governments of funding required to address global issues like persistent inequities, climate change, and the COVID-19 pandemic.
The FACT Coalition, alongside Americans for Tax Fairness and the Institute on Taxation and Economic Policy, has Given the historic opportunity for the OECD agreement to start dismantling worldwide tax avoidance and financial secrecy regimes, the FACT Coalition weighed in on the need for the process to continue to incorporate concerns about process, transparency, and equity raised by developing nations led by the G-24, both in implementing the agreement and going forward.
Dismantling these systems and implementing the OECD deal must start at home for the U.S. This week, the White House released a new framework for the Build Back Better Act, which, if passed by Congress, would advance key components of the OECD deal domestically and begin to restructure the tax code to decrease the incentives to profit-shift and offshore. The revised Build Back Better framework, would, among other changes, revise the Global Intangible Low-Taxed Income (GILTI) tax to create a minimum U.S. tax rate on foreign profits equal to 15 percent, and it would apply the GILTI on a country-by-country basis, in each case, consistent with the OECD framework minimum requirements. The framework would also reform the base erosion and anti-abuse tax (the BEAT) so that it more effectively deters all base-eroding payments and deductions. That there is room for improvement in the proposed framework is not debatable as recent FACT analysis highlights based on the ways that an OECD deal can give the U.S. greater flexibility in stopping tax-dodging and promoting MNE accountability through tax. Indeed, both the OECD agreement and the Build Back Better Act (along with the public debate around provisions in the bill) demonstrate the need for greater transparency into MNE tax practices, including in response to any international taxation overhaul.
However, coupled with increased funding for the IRS and a broader corporate minimum tax being advanced, the revised Build Back Better and OECD proposals can work together to create a fairer tax system in the U.S. and globally to dismantle improper preferences for tax-dodging corporations at the expense of our communities.
Fighting Illicit Financial Flows
Pandora Papers Reveal the Need for Beneficial Ownership ReformHousing in the U.S.
The International Consortium of Investigative Journalists, along with major news outlets like the Washington Post, began releasing groundbreaking findings earlier this month, confirming the use of a secretive “offshore” financial system that allows criminals, world leaders, and others to hide billions of dollars from authorities, fueling tax evasion and corruption. The “Pandora Papers” are the greatest leak of private financial documents to date, far outstripping the Panama Papers in terms of extent and volume. As a response, in part, to previous financial revelations such as the Panama Papers, the U.S. Congress enacted the Corporate Transparency Act to require, for the first time, the disclosure of the true “beneficial owners” of corporate entities registered in the U.S. The FACT Coalition presented the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) with a roadmap for implementing the Corporate Transparency Act in May. The need to broadly construe the Act to cover partnerships, foundations, sole proprietorships, and the kind of trusts utilized by foreign players to secretly transport cash to the United States, as highlighted by the Pandora Papers revelations, was one of the other significant suggestions
Following the release of the Pandora Papers, the Establishing New Authorities for Business Laundering and Enabling Risks to Security (ENABLERS) Act was introduced in Congress. The ENABLERS Act would strengthen due diligence rules for US-based middlemen like accountants and art-dealers, to directly address the ways in which various US professional service markets enable the corruption and tyranny we profess to be fighting by providing kleptocrats and criminals with the technical means for hiding, investing, laundering or otherwise employing their ill-gotten gains. The Bill also contains provisions on repealing improper anti money-laundering regulatory exemptions on the real estate sector, as well as making Geographic Targeting Order (GTO) disclosures,an important tool for discouraging real estate money laundering, permanent and required for all purchases of real estate made in the United States.
Civil Society Organizations Organize Support of Strong Beneficial Ownership Implementation and Anticorruption Measures
The FACT Coalition and its allies continue to urge a strong rulemaking on the Corporate Transparency Act. In a new letter to the Financial Crimes Enforcement Network (FinCEN), 31 Civil Society organizations signed onto the letter in support of strong beneficial ownership implementation, with particular attention to U.S. trusts, in light of the Pandora Papers. U.S. trusts were featured prominently in the leaks, showing that trusts in states like South Dakota were susceptible to being used as a vehicle for illicit flows. Specifically, the domestic U.S. trust industry, along with the federal and state governments responsible for regulating the industry, is directly responsible for allowing corrupt actors to place their money in trusts and avoid any accountability from law enforcement (and in many cases, from taxing authorities) due to the secretive nature of the trusts.
The FACT Coalition joined over 30 organizations to send a letter to the Senate Armed Services Committee, in support of the inclusion of six bipartisan anti corruption measures in the Senate version of the defense appropriations bill. Their passage would enhance the U.S.’s ability to increase transparency and sanction corrupt actors. Most notably, passage of The Global Magnitsky Human Rights Accountability Reauthorization Act and The Combating Global Corruption Act (CGCA) will act as powerful tools to evaluate corruption. The former will reauthorize and enhance the Global Magnitsky Act, while the latter will require the State Department to produce a public report that evaluates country-by-country compliance with internationally recognized anti corruption norms and standards, with corrupt officials in those countries that score in the lowest of three tiers being evaluated for inclusion on the Global Magnitsky list of sanctions designations.
Latest from FACT
 | PRESS RELEASE: Rep. Doggett to Discuss the Impact of OECD’s New Tax Framework for US Businesses and Workers with the FACT Coalition October 28: Representative Lloyd Doggett (D-TX) will join FACT, Small Business Majority, American Federation of Labor and Congress of Industrial Organizations (AFL-CIO), and Oxfam America to discuss the impact that the White House’s newly announced Build Back Better Framework and a global agreement on the taxation of multinational enterprises (MNEs) would have on the U.S. economy. |
 | PRESS RELEASE: Global Tax Deal Advances, but Questions Persist October 8: The FACT Coalition gave comments on the OECD framework and raised concerns about the long-term political viability of this two-pillar global tax solution. |
| PRESS RELEASE: Massive “Pandora Papers” Financial Secrecy Leaks Highlight Need for U.S. Reforms October 4: The FACT Coalition called for strong implementation of the Corporate Transparency Act and other steps by the U.S. to curb use of offshore financial systems by criminals and tax dodgers. |
FACT in the News
 | QUOTED IN: Praise the Pandora Papers October 10: The Washington Post quotes FACT’s Ian Gary on the coalition’s call on the Treasury Department’s Financial Crimes and Enforcement Network to draft regulations to include the disclosure of the real beneficial owners of trusts, foundations, partnerships and other entities not specifically granted exemptions in the law. |
 | QUOTED IN: Panama Papers put one company out of business. The rich and powerful weren’t deterred October 6: The Miami Herald highlights comments from FACT Policy Director Ryan Gurule on the harmful tax policies that deny governments the ability to address some of its largest problems including inequality and climate change. |
 | QUOTED IN: Pandora Papers: 4 takeaways from massive leak of world leaders’ finances October 9: The Hill quotes FACT’s Ian Gary on the importance of the Enablers Act getting the U.S. back on the right track. |
 | QUOTED IN: The five things the United States can do to stop being a haven for dirty money October 7: Carnegie Endowment for International Peace quotes FACT’s Ian Gary on the need for strong action by the Biden Administration and Congress to address issues highlighted in the Pandora Papers. |
 | QUOTED IN: 136 countries agree to global minimum tax for corporations in ‘historic’ OECD deal October 9: ICIJ quotes FACT’s thoughts on the need for more equality in the global tax system. |
 | QUOTED IN: Baker McKenzie is ‘architect and pillar’ of offshore system that hides wealth, Pandora Papers report says October 5: The ABA Journal quotes FACT Executive Director Ian Gary on the need for reform after the release of the Pandora Papers. |
 | QUOTED IN: Pandora’s depressing déjà vu October 7: Coda highlights FACT’s efforts to provide a blueprint to the Treasury Department for implementation of the Corporate Transparency ACT and the need for better resourcing for regulatory and enforcement agencies. |
Recent and Upcoming Events
 | (RECENT) Advancing Corporate Tax Transparency: A Conversation with Sen. Van Hollen (D-MD), Rep. Axne (D-IA) and Business Leaders October 6: FACT’s Executive Director Ian Gary joined Ali-Reza Vahabzadeh of the American Sustainable Business Council and lawmakers from Congress to discuss the Disclosure of Tax Havens and Offshoring Act. |
| (RECENT) Pan African Conference on Illicit Financial Flows and Taxation October 28: FACT Coalition and the African Tax Administration Forum held a session on public country-by-country tax reporting and its usefulness for African tax authorities, investors, and civil society. |
About the FACT Coalition