Disclosure of Tax Havens and Offshoring Act Would Implement Global, Public Country-by-Country Tax Reporting to Support Informed Investor Decisions
WASHINGTON, DC – The Financial Accountability and Corporate Transparency (FACT) Coalition hailed today’s passage of the Disclosure of Tax Havens and Offshoring Act in the House of Representatives. Championed by Rep. Cynthia Axne (D-IA), the legislation, included as Title V of the Corporate Governance Improvement and Investor Protection Act (H.R. 1187), requires multinational corporations registered with the Securities and Exchange Commission (SEC) to disclose their taxes paid and other key financial information publicly on a country-by-country basis.
“House passage of this important legislation shows lawmakers understand – with the recent announcement of G7 support for a global minimum corporate tax and other U.S. reforms on the horizon – that investors, other market participants, and the public need better information to understand the impact of these changes,” said Erica Hanichak, government affairs director of the FACT Coalition. “The Disclosure of Tax Havens and Offshoring Act shines a much-needed spotlight on corporate profit shifting and tax avoidance strategies. We urge the Senate to expedite this important transparency measure after its quick passage in the House. It’s far past time for corporate tax avoidance tactics to come out of the shadows.”
The Disclosure of Tax Havens and Offshoring Act has also been introduced in the Senate (S.1545), with Sen. Chris Van Hollen (D-MD) leading the chamber on the measure.
The legislation that passed the House today would require multinational corporations registered with the Securities and Exchange Commission (SEC) to disclose basic financial data – including profits, taxes paid, number of employees, and tangible assets – about their operations and subsidiaries overseas. Under an international OECD framework, this country-by-country reporting (CBCR) is already privately reported to the IRS, making any public reporting costs negligible.
Investor groups with close to $3 trillion in assets under management pushed for quick movement on the legislation in an open letter released last month. “Investors require income and tax information at the country-by-country level to better understand a company’s financial, reputational, and economic risks to make informed investment decisions,” the investors said. “With global momentum growing to significantly change how multinational corporations are taxed – including through the Administration’s tax change proposals and the OECD negotiations – investors now, more than ever, need information to inform them on how their holdings may be affected by changes to U.S. tax law.”
The Biden Administration and Congress are increasingly focused on cracking down on tax avoidance and evasion, including plans to provide more resources to the Internal Revenue Service (IRS). So called “aggressive tax planning” can carry material risks for investors in multinational companies. For example, in November the U.S. Tax Court supported IRS allegations that Coca-Cola used profit-shifting to underpay taxes and the company is facing a possible $12 billion tax liability through 2020.
House passage of this legislation represents further momentum in the global push for greater multinational tax transparency. Earlier this month, the European Union finalized a political deal to require a degree of public country-by-country reporting, although the measure falls short of the full, global reporting required under U.S. legislation.
Public country-by-country reporting is widely backed by a broad range of civil society groups, from labor union confederations such as the AFL-CIO, to small business groups, to economic justice, racial justice, and environmental justice organizations. Ninety-seven civil society organizations issued a joint statement urging Members of Congress to advance the legislation.
“Increasing tax transparency through public disclosure will encourage multinational companies to steer clear of the most questionable tax practices. The U.S. needs additional tax revenues to invest in infrastructure, tackle the climate crisis, and fund programs promoting racial and gender justice,” Hanichak said.
Notes to Editor:
- Click here to read the text of the Disclosure of Tax Havens and Offshoring Act.
- Click here to read FACT’s endorsement of the Disclosure of Tax Havens and Offshoring Act as included in Title V of Corporate Governance Improvement and Investor Protection Act
- Click here to read a letter from 66 investors representing nearly $3 trillion in assets under management supporting the legislation.
- Click here to read the letter 97 civil society organizations to Congress.
- Click here to read the letter from American Sustainable Business Council, Main Street Alliance, and Small Business Majority, supporting the legislation.
- Click here to learn more about the diverse constituencies supporting for public country-by-country reporting.