“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 Tax Bills Bring Reform Within Reach
U.S. international tax reform may soon be a reality. For the last month, lawmakers in both chambers have sought revenue to fund President Biden’s $3.5 trillion Build Back Better infrastructure investment. The House and the Senate have both put forward their respective plans, raising at least $330 billion in revenue from international tax alone (though, this is well short of President Biden’s plan to raise over $1 trillion through needed international tax reform). With the House legislation already sailing through the Ways and Means and Budget committees and joint leadership meeting to hash out a financing “framework”, it appears that international tax reform is accelerating towards the finish line.
While the current legislation marks a massive step forward on international tax, there’s a strong case to further strengthen reform for both the House draft legislation and Senate framework. The public has high expectations for tax reform with well over two-thirds of voters backing measures to eliminate deductions for offshoring. Labor unions and small businesses have also time and time again reiterated the need for the strongest possible international reform if Congress truly wants to increase the incentive to invest in the U.S. and level the playing field between big multinationals and America’s small business and workers. More recently, 28 racial justice organizations joined together to make their case that a $3.5 trillion package, paid for in part through international tax, would be crucial for advancing racial equity.
The FACT Coalition, alongside Americans for Tax Fairness and the Institute on Taxation and Economic Policy, has reaffirmed that effective international tax reform must include the complete elimination of tax deductions for offshoring, stricter anti-inversion rules, updates to the Base Erosion and Anti-Abuse Tax, bank reporting requirements on financial account “inflows” and “outflows,” comprehensive IRS funding, and public country-by-country tax reporting. As has been highlighted in both the Wall Street Journal and Fox Business, FACT finds that the current proposal in the House falls short in closing the offshoring deduction under the U.S. global intangible low-tax income (GILTI) tax and might even exacerbate certain incentives for offshoring.
If the political stakes were not high enough, the world is also watching what Congress will do. The global community is preparing to pick up OECD global minimum tax discussions in October to finalize an agreement. A robust domestic reform would bolster Secretary Yellen as she continues to pitch the deal to potential tax haven holdouts, and to improve the current two-pillar framework. Domestic and multilateral corporate tax reform go hand-in-hand, and now is Congress’ chance to take global leadership.
Investors Organize Sustained Support for Tax Transparency
The FACT Coalition is continuing to lead the The drive for tax transparency is heating back up. After successfully pushing the House to pass public country-by-country tax reporting legislation in June, investors came out in force to show strong and sustained interest in tax transparency in a letter to the Financial Accounting Standards Board (FASB). Joining our investor allies, FACT submitted its own comment to FASB making the case that public country-by-country reporting would “help identify countries that are facilitating corporate tax dodging and thereby expose tax risks currently hidden from investors.”
Transfer pricing experts have picked up on the news, pointing towards growing awareness of investors’ calls for change and the seriousness with which they are being considered. Given FASB’s technical expertise, investor focus, and authority in maintaining the Generally Accepted Accounting Principles (GAAP), the Board is well suited to bring about widespread adoption of public country-by-country tax reporting.
Fighting Illicit Financial Flows
The Global is Local – Linking the Fight Against Corruption with Fair Housing in the U.S.
The FACT Coalition, Global Financial Integrity, Action Center on Race and the Economy, Transparency International’s U.S. Office, and the California Reinvestment Coalition co-sponsored a panel to learn from experts about the scope of real estate money laundering and what the U.S. should do to fight it, and in doing so combat global corruption and create fairer housing markets here at home. Among the recommendations suggested was one to advance a permanent Treasury rulemaking inspired by the Department’s current, temporary Geographic Targeting Orders (GTOs), which bring transparency into anonymous corporate ownership of U.S. real estate.
Panelists stressed the importance of creating a new national regime that eliminates a dollar threshold for reporting, and considers the inclusion of both residential and commercial properties. The event was inspired by FACT member Global Financial Integrity’s (GFI) new report, which exposes gaps in the U.S. anti-money laundering regime and underscores the need to expand the reporting currently happening under the GTOs.
Additionally, the California Reinvestment Coalition called attention to its’ report on California Landlords, which revealed that under the anonymity and lack of reporting measures, corporate landlords are able to enjoy impunity from harmful practices. Harmful practices include buying up single-family homes that strips opportunities away from low and moderate-income families to find and stay in adequate housing as well as evicting residents regardless if they are in rent-controlled properties. A key recommendation by GFI for the U.S. real estate sector is for FinCen to create reporting requirements for real estate money laundering typologies related to commercial real estate transactions.
Anti-Corruption Advocates Mark Legislative Milestone
With the December 9-10 Summit for Democracy around the corner, anti-corruption efforts are accelerating in Washington. The Congressional Caucus against Foreign Corruption and Kleptocracy, formed this June to widespread civil society welcome, advanced a bevy of anti-corruption provisions as the bipartisan Counter-Kleptocracy Act this month. In a major legislative milestone, the House recently voted a half-dozen measures into the National Defense Authorization Act. The package of reforms now await approval in the Senate.
The work of anti-corruption advocates isn’t done yet, however. As Josh Rudolph of the German Marshall Fund outlines in his new report Regulating The Enablers, there is still work to be done in closing off the U.S. financial system from abuse by foreign kleptocrats and the lawyers, real estate agents, private investment advisers, and hedge fund managers that choose to support them.
Beneficial Ownership One Year After the FinCEN Files
Rulemaking for a U.S. beneficial ownership directory is underway one year after the FinCEN Files were released. FinCEN is debating whether partnerships, trusts, and other business entities should be included in the scope of the new regulations. Reformers in the financial industry are concerned that if they get it wrong, criminals will exploit the exemptions and hide behind a different type of paper company. In a new Buzzfeed Article discussing corporate transparency implementation, FACT Government Affairs Director Erica Hanichak noted that US beneficial ownership database must “include partnerships, sole proprietorships, business trusts, foundations and business associations.” Without these groups included, the new law may provide a loophole for criminal behavior.
As part of its public consultation on Recommendation 24, FACT has filed comments to the Financial Action Task Force (FATF) encouraging the international body to adopt more stringent beneficial ownership principles. Last month, FACT called on the FATF to adopt measures that would encourage member countries to develop up-to-date, centralized, and accessible beneficial ownership databases. The FATF meets in October to review and amend the current recommendation.
Latest from FACT
|PRESS RELEASE: Investors Call on Financial Accounting Standards Board to Prioritize Public Country-by-Country Tax Reporting|
September 23: FACT joined with a broad coalition of investors with over $2.9 Trillion in assets under management to urge more transparent tax disclosure from FASB.
|PRESS RELEASE: Congress Must Strengthen Proposed International Tax Measures in Line with Biden’s Tax Plans|
September 13: The FACT Coalition urged the House Ways & Means Committee to make critical revisions to its draft Committee Tax Plan to help curb tax-haven abuse, protect American jobs, and begin to meet the challenge set by the Biden Administration to end the international race to the bottom in corporate tax collections.
|PRESS RELEASE: International Tax Reform Draft from Senate Finance Members is Good for Tax Fairness, but More can be Achieved|
August 25: The FACT Coalition welcomed the discussion draft released by Senators Wyden, Warner, and Brown on international corporate tax reform and pointed to more ways progress could be achieved for fair international tax reform.
|COMMENT LETTER: FACT Sent Comments to FATF Urging Strong Beneficial Ownership Regulation: |
August 23: FACT recently sent comments to the Financial Action Task Force (FATF) urging the international body to adopt more robust beneficial ownership recommendations as part of its public consultation on Recommendation 24.
FACT in the News
|QUOTED IN: Groups urge FASB to prioritize public country-by-country tax reporting|
September 23: MNE Tax highlights FACT’s work organizing investor support and offering advice to FASB in favor of public country-by-country reporting.
|QUOTED IN: A Year After The FinCEN Files, The Biggest Change Is Still A Work In Progress|
September 21: FACT’s Government Affairs Director Erica Hanichak is quoted by Buzzfeed news discussing the status of the Corporate Transparency Act and beneficial ownership reform one year out from the FinCEN Files.
|QUOTED IN: In House Tax Bill, Companies Get Return of Higher Rates but Not the Breaks|
September 15: The Wall Street Journal quotes FACT’s thoughts on proposed international tax reform legislation
|QUOTED IN: House Dems’ proposed tax plan could increase offshore avoidance, shift burden onto small businesses|
September 14: Fox Business quotes FACT’s thoughts on proposed international tax reform legislation
Recent and Upcoming Events
|(UPCOMING) Advancing Corporate Tax Transparency: A Conversation with Sen. Van Hollen (MD), Rep. Axne (IA) and Business Leaders|
October 6: FACT’s Executive Director Ian Gary to join Ali-Reza Vahabzadeh of the American Sustainable Business Council and lawmakers from Congress in discussing the Disclosure of Tax Havens and Offshoring Act.
|(UPCOMING) UNPRI Digital Conference|
October 18-21: This October, the PRI will bring together investors, policymakers and other sustainable finance stakeholders from around the world for an online exchange of views and ideas. Momentum is building on the road to the pivotal COP26 summit, the first year of the Biden administration is in full swing, and the world is still reeling from the impact of the global COVID-19 pandemic – with all eyes tracking the progress of the vaccine rollout.
|(UPCOMING) Global trends in corporate tax disclosure – an investor perspective|
October 12: Against a backdrop of increasing scrutiny of profit shifting behavior, this webinar will discuss the recent research on trends in corporate tax disclosure globally, drawing on reporting from over 1,300 large listed companies in developed and emerging markets, comparing tax disclosures to those on other sustainability issues; the growing regulatory focus on corporate tax practices; and the way in which investors are approaching tax transparency in their portfolio companies
|(UPCOMING) World Bank and IMF Annual Meetings|
October 11-17: The Annual Meetings of the Boards of Governors of the World Bank Group (WBG) and the International Monetary Fund (IMF) bring together central bankers, ministers of finance and development, parliamentarians, private sector executives, representatives from civil society organizations and academics to discuss issues of global concern, including the world economic outlook, poverty eradication, economic development, and aid effectiveness.
|(UPCOMING) Framing Feminist Taxation: Making Taxes Work for Women|
September 30: The Global Alliance for Tax Justice (GATJ) and ActionAid invite their staff, members and partners for this webinar, in which we will share more information about ‘Framing Feminist Taxation’ (2021), a guide developed by the GATJ’s Tax and Gender Working Group’s members, together with Womankind Worldwide and Akina Mama wa Afrika. Join us to understand the key learnings of this publication and discuss how this can be used going forward in order to advance both tax justice and gender justice agendas.
|(UPCOMING) The anti-corruption potential of beneficial ownership transparency and implications for natural resources|
September 30: Experts on this virtual panel will highlight the rapidly changing landscape around beneficial ownership regulations and the importance of beneficial ownership information for improving conservation outcomes. Panelists will discuss good practices for regulation development and how collaborations with law enforcement and financial institutions can advance needed reforms.
Social Media Shoutouts
@RepLloydDoggett, A new @foe_us report shows how a Trump-era tax loophole is saving 12 fossil fuel multinationals $85 billion on their foreign extraction profits. My No Tax Breaks for Outsourcing would end this tax subsidy for polluting our planet. See: https://foe.org/news/new-report-reveals-big-oils-86b-offshore-tax-bonanza/
About the FACT Coalition