There is widespread agreement, across the political spectrum, that the gaming of the tax code by multinational corporations is a problem. When profits and jobs are shipped offshore, we not only harm the U.S. economy, we fuel a tax haven industry that drains wealth around the world. We seek to fix the problem of large, well-connected interests gaming the tax system.
Important Steps to Fix the Gaming of the Corporate Tax System
A common theme from both Democrats and Republicans in the recent election was the increasing problem that multinational companies are moving money and jobs offshore. These practices are encouraged by loopholes in the tax code, which encourage companies to move. These loopholes should be closed.
On Tax Reform, Congressional Leaders Propose Widening Loopholes for Multinationals at Expense of Domestic Businesses and Middle Class Taxpayers
Much of the analysis of the 2016 election reflects on a middle class that feels overburdened. While the economy has certainly improved since the recession, one thing has gotten worse that may be partially to blame—offshore tax haven abuse. A new report from U.S. PIRG Education Fund finds that multinational companies dodge an estimated $147 billion in federal and state taxes annually through offshore tax haven loopholes, shifting that burden instead onto small businesses and individual taxpayers. Titled “Picking Up the Tab 2016: Small Businesses Bear the Burden for Offshore Tax Havens,” the study estimates that each small business, on average, owes $5,186 more on its annual tax bill to collectively make up for the federal and state corporate tax revenue lost to offshore tax havens.
Multinational Companies Dodging $147 Billion Annually in State and Federal Taxes through Offshore Tax Schemes
WASHINGTON, D.C. – A new report from U.S. PIRG Education Fund finds that multinational companies dodge an estimated $147 billion in federal and state taxes annually through offshore tax haven loopholes. The report explains the staggering cost to small businesses and individual taxpayers, who are forced to shoulder the increased tax burden.
As Congress Pursues Tax Reform, FACT Urges Lawmakers to Close Loopholes, Hold Large Companies Accountable, and Refrain from Disadvantaging Wholly Domestic and Smaller Businesses
Corporate tax reform is coming. The central question is: what will it look like? After a campaign in which both presidential candidates pledged to close loopholes that allow corporations to dodge taxes and stop companies from booking their profits overseas, is there the political will to do it?
One current proposal in Congress calls for a 0% tax on profits booked offshore. Yes, the proposal is for 0%. That is not a typo. Given the campaign rhetoric, that seems antithetical to cracking down on corporate tax dodging. But that hasn’t stopped Representative John Delaney (D-MD) from pushing a bill that would do just that. Bad enough that House Speaker Paul Ryan (R-WI) and the President-elect have suggested giveaway-corporate-tax rates of between 8% and 10% on offshore profits — but the new starting point appears to be zero.
Sadly, the rate is only a part of the problem and, in some ways, the lesser of the evils. These proposals leave in place all of the loopholes that enable companies to move money and jobs overseas. They allow multinational companies to continue to defer paying taxes on profits booked offshore until the next giveaway — referred to in policy circles as a tax ‘holiday.’ These ‘holidays’ reward a small number of very large corporations — just 30 Fortune 500 companies hold 65% of the estimated $2.6 trillion in offshore profits — with a special tax rate (or no tax rate). That leaves domestic companies, smaller businesses, and individuals to pick up the tab (and, it’s a large tab: Citizens for Tax Justice estimates that Fortune 500 companies now owe more than $700 billion in unpaid taxes on their earnings booked offshore).
Treasury Finalizes Anti-Inversion Rules Tackling “Earnings Stripping”
WASHINGTON, D.C. – The U.S. Department of the Treasury finalized a long-awaited rule Thursday aimed at countering multinational tax avoidance, in a move welcomed by the Financial Accountability and Corporate Transparency Coalition (FACT Coalition).
In this article—originally published in Tax Notes—FACT Executive Director Gary Kalman uses the recent Apple tax ruling by the European Commission to identify problems with proposals for a territorial tax system in the United States. He argues that policymakers should instead focus on ending deferral, requiring public country-by-country reporting, and adopting provisions of the Stop Tax Haven Abuse Act.
