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Close Tax Loopholes

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.

Treasury Department Building

How Treasury Could Take Action to Prevent Inversions

Even as more large companies announce plans to take advantage of the inversion loophole to avoid taxes, Congress has refused to move on commonsense legislation that would put an end to inversions. Fortunately, as outlined in a new letter signed by Citizens for Tax Justice and 54 other groups, there are a number of additional actions that the Treasury Department could take without Congressional approval to stem the tide of inversions.

Although Treasury issued new regulations in response to the surge in inversions in 2014 and 2015, Pfizer’s planned inversion with Allergan demonstrates that the regulations so far have been inadequate to prevent this and similar planned inversions by Johnson Controls and IHS. Perhaps the biggest motivation for Pfizer’s planned inversion is that it could allow the company to avoid an estimated $40 billion in taxes that it owes on the $194 billion in untaxed earnings the company has offshore. Expatriating to Ireland through an inversion will allow Pfizer to avoid paying any tax on its offshore hoard through an accounting gimmick called a hopscotch loan, which effectively allows the new foreign parent company to reinvest its untaxed offshore earnings without triggering the US taxes it would normally owe.

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Tax Reform Should Close Offshore Loopholes, End Tax Haven Abuse

FACT Coalition Submits Comments to House Ways and Means Committee Ahead of International Tax Reform Hearing
WASHINGTON, D.C. – Ahead of a planned hearing on international tax reform, the FACT (Financial Accountability and Corporate Transparency) Coalition today submitted comments to the U.S. House Committee on Ways and Means urging lawmakers to focus reform efforts on closing offshore loopholes and ending tax haven abuse.

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Civil Society Assails Multinational Tax Giveaway

“Tax Extenders” Deal Could Permanently Enshrine Outrageous Tax Dodging Loophole in Tax Code, Extend Another One for Five Years
Congressional Negotiators Ignore a Hundred Thousand Letters from Constituents Calling for an End to Egregious Offshore Tax Loopholes
WASHINGTON, DC – Civil society groups assailed a backroom congressional tax deal released early this morning as an egregious giveaway to multinational tax dodgers at the expense of U.S. taxpayers.  The so called “tax extenders” deal could permanently enshrine in the tax code an offshore loophole known as the “Active Financing Exception”, which is abused by multinational companies to artificially shift profits overseas and dodge taxes at the expense of the American public.  The deal also extends for five years another offshore loophole, known as the “CFC Look-Through Rule”, which also allows corporations to use accounting tricks to avoid paying taxes.

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What Makes Delaware an Onshore Tax Haven

When you think of a tax haven, you probably imagine the far off tropical islands of Bermuda or Grand Cayman, but the reality is that there is a major tax haven even closer to home in the state of Delaware. A new report from Institute on Taxation and Economic Policy (ITEP) explains how one our nation’s smallest states is one of the world’s biggest havens for tax avoidance and evasion.

What makes Delaware a tax haven? First, Delaware is one of the easiest places in the world to set up an anonymous shell corporation. In fact, setting up a company in Delaware requires less information than signing up for some library cards. This means that it is difficult for law enforcement to trace the activities of the anonymous shell corporations to the people who actually own and control them. This is what makes Delaware corporations an ideal vehicle not only tax evasion, but also for illicit activities like drug trafficking, terrorism finance and defrauding the government.

In addition, the state does not require companies to pay any tax on income relating to intangible assets held by companies based in the state. Companies take advantage of accounting gimmicks to shift their intangible income from other states into Delaware in order to take advantage of the zero tax rate on income earned from intangible assets. For example, Toy R Us has avoided millions in taxes by transferring its trademarks and trade names (including “Geoffrey the Giraffe”) into Delaware and charging its subsidiaries in other states for use of its trademarks.

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Tens of Thousands Urge Congress to Reject Any Extension of Egregious Tax Loopholes

House Lawmakers to Vote this Week on Temporary Renewal of “Tax Extenders” Package – including Two Outrageous Offshore Tax Loopholes Costing Taxpayers $10 Billion Annually
Some on Capitol Hill Push to Make Loopholes Permanent, but Media Reports Suggest Offshore Provisions Could Be Phased out as Part of Bigger Tax Deal, A Welcome Development
WASHINGTON, D.C. – Members of Congress should reject two egregious international tax loopholes in pending legislation, which combined would cost American taxpayers $10 billion per year, the Financial Accountability and Corporate Transparency (FACT) Coalition, its members, and tens of thousands of Americans said today.

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