Statement of Clark Gascoigne, Interim Executive Director, Financial Accountability and Corporate Transparency (FACT) Coalition
Note: Yesterday evening the U.S. Department of Treasury announced regulatory actions to further limit the ability of multinational corporations to benefit from the tax avoidance maneuvers known as “inversions” and “earnings stripping.”
WASHINGTON, DC – Clark Gascoigne, the Interim Executive Director of the Financial Accountability and Corporate Transparency (FACT) Coalition, issued the following statement today reacting to the announcement of new measures by the U.S. Department of the Treasury to counter corporate tax inversions:
“The gaming of our international tax system exacerbates economic inequality; drains revenue out of both developed and developing countries; hurts legitimate businesses, families, and communities; and undermines our country’s ability to govern. The FACT Coalition scored an important victory last night when Treasury responded to our collective call to tighten its regulations on inversions to stop proposed, abusive mergers, like the merger of the pharmaceutical giant Pfizer with Ireland-based Allergan.
“In technical terms, Treasury’s temporary regulations stop companies from skirting the preexisting technical definition of an inverted company by disregarding formerly American assets purchased by the foreign company for the three years leading up to the proposed merger when determining whether the thresholds of foreign ownership have been met. Essentially, this stops ‘serial inversions,’ where a company like Allergan—which itself inverted to Ireland just a couple years ago—merges with another American company to invert again.
“Additionally, the FACT Coalition is pleased that Treasury also proposed new regulations to limit earnings stripping by multinational corporations. For far too long, U.S. companies have been allowed to deduct interest paid on debt to a foreign parent company, slashing their domestic tax bills, leaving average taxpayers and small businesses to pick up the slack. The new regulations would give stronger tools to the Treasury to determine when a distribution is actually equity versus debt, and to allow better classifications of money transfers when one transaction has elements of both debt and equity. And, companies will be required to better define and document their related-party transactions.
“These moves by Treasury will surely limit the attractiveness of inversions and the related benefits of earnings stripping, but Congress must still act to clearly delineate that any former U.S. company that—after merging with a foreign company—is still majority-owned by the same American shareholders and managed and controlled domestically, be considered a U.S. company for tax purposes.”
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Notes to Editors
- Read an HTML version of this statement.
- Read more on the announcement from the Treasury Department.
- Click here for a full list of the more than 100 FACT Coalition members and supporters.
- Read other statements on this news from:
- See various recent letters to the Treasury urging strong action against inversions from:
- Read FACT’s Statement on the #PanamaPapers here.
Journalist Contacts:
Clark Gascoigne
FACT Coalition
cgascoigne@thefactcoalition.org
+1 202.813.0290