News & Events

Just the FACTs: December 9, 2016

Happy International Anti-Corruption Day!

Welcome to our “Just the FACTs” newsletter, which aims to highlight pertinent news stories and information related to our goals of curtailing offshore tax haven abuses, increasing the transparency of company ownership, and curbing the laundering of illicit money through the financial system.

Send feedback or items for future newsletters to Jacob Wills at

State of Play

For more than a decade we have seen a steep climb in the amount of money kept offshore by multinational companies.  This has resulted in $2.5 Trillion to remain untaxed—at an estimated cost of $700 billion to the US Treasury.  Throughout the 2016 election, both presidential candidates pledged to close loopholes that allow corporations to dodge taxes and stop companies from booking their profits overseas.  Though the follow-through has yet to be seen.  Many have even argued that Donald Trump’s victory was the result of a frustrated middle class that increasingly feels over-burdened, while they see the wealthy and corporations—following their own set of rules—shifting their responsibilities onto them.

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 use accounting gimmicks and tax schemes to avoid taxes while  benefiting from the services and infrastructure that taxes—paid by small business and the middle class—provide. These companies transport goods with our infrastructure, hire our educated workers, are protected by our police, and benefit from our rule-of-law, all while passing the check on to everyone else.

Congress and the incoming administration have said repeatedly that tax reform would be a priority in the first 100 days—what that means exactly is yet to be seen.  In a new blog, FACT’s Gary Kalman walks through some of the initial proposals and confronts some of their worst features.  Other questions are still left unanswered. FACT member Citizens for Tax Justice looks at some of the most critical questions in a recently released blog; Will tax reform be revenue-neutral or a substantial tax cut? Will tax reform be passed on a bipartisan basis or through budget reconciliation? How will lawmakers reform the international corporate tax system? Regardless, one question has already been answered, corporate tax reform—in one form or another—is coming.

Whether it’s to help the wealthy avoid tax or to shield criminal activity, the secret offshore world is dependent on one key feature: it’s secret.  Unfortunately, the U.S. continues to enable this secrecy by being a safe haven for the creation of anonymous companies.  Last week the Financial Action Task Force (FATF)—the international body that sets anti-money laundering and counter-terror financing (AML/CFT) standards—released their findings on an audit of the U.S. AML/CFT regime.  The report found that there remains a gaping hole: the problem of anonymous shell companies. It also railed against gaps in U.S. regulatory framework around specific institutions—sometimes referred to as gatekeepers—including investment advisers (IAs), lawyers, accountants, real estate agents, trust and company service providers.

The real world impact of these gaps could be seen with stories shared at the International Anti-Corruption Conference (IACC) in Panama (of all places) this past week.  Several FACT members joined the event to learn about the real world impacts of corruption and to discuss solutions. There is no doubt that the so called ‘gatekeepers’ hold a key to unraveling the network of the secret offshore world. At the event, FACT’s own Clark Gascoigne, moderated a panel discussing the role that bankers, lawyers, accountants, real estate professionals, luxury goods dealers, and others have in keeping corrupt money out of clean businesses. The panel—which included representatives from the NGO, Government, and private sector—discussed some of the challenges that gatekeepers face, the impact of their shortcomings, as well as ways to better prevent illicit capital from entering businesses or financial markets.  Common ground was found on one issue in particular by all of the panelists: beneficial ownership transparency is something that everyone could support.

From the FACT Coalition and Its Partners


Level the Playing Field: Tax Reform Americans Deserve

FACT Coalition, November 28, 2016

By Gary Kalman

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.

Read the full blog.
Read Gary Kalman’s op-ed in Tax Notes.


Financial Flows and Tax Havens: Combining to Limit the Lives of Billions of People

Global Financial Integrity, December 5, 2016

Global Financial Integrity (GFI), the Norwegian School of Economics and a team of global experts released a study showing that since 1980 developing countries lost US$16.3 trillion dollars through broad leakages in the balance of payments, trade misinvoicing, and recorded financial transfers. These resources represent immense social costs that have been borne by the citizens of developing countries around the globe. Funding for the report was provided by the Research Council of Norway and research assistance was provided by economists in Brazil, India, and Nigeria.

Titled “Financial Flows and Tax Havens: Combining to Limit the Lives of Billions of People,” the report demonstrates that developing countries have effectively served as net-creditors to the rest of the world with tax havens playing a major role in the flight of unrecorded capital. For example, in 2011 tax haven holdings of total developing country wealth were valued at US$4.4 trillion, which exacerbated inequality and undermined good governance and economic growth.

Read the summary
Read the full report
GFI’s press release

Picking up the Tab 2016

U.S. PIRG, November 29, 2016

By Alexandria Robins and Michelle Surka

Every year, corporations and wealthy individuals use complicated gimmicks to shift U.S. earnings to subsidiaries in offshore tax havens – countries with minimal or no taxes – in order to reduce their federal and state income tax liability by billions of dollars. While tax haven abusers benefit from America’s markets, public infrastructure, educated workforce, security and rule of law – all supported in one way or another by tax dollars – they avoid paying their fair share for these benefits.

Small business owners are hit twice by the effects of tax dodging by large multinational corporations. Small businesses are placed at a competitive disadvantage because they rarely have subsidiaries in tax havens and the armies of tax lawyers and accountants necessary to exploit the loopholes that come with such subsidiaries. Meanwhile, nearly 73% of Fortune 500 companies operate subsidiaries in tax haven countries. Small businesses are forced to compete with multinational corporations based on the cleverness of their tax gimmicks rather than on their innovation or quality of product.

Read the summary
Read the full report
Read U.S. PIRG’s press release
Read FACT’s press release

Beyond the PR Spin: Carrier Corp. Holds American Jobs Hostage for Tax Breaks

Citizens for Tax Justice, November 30, 2016

By Matt Gardner

The Carrier Corporation Tuesday announced that it will not fully follow through on its threat to move 2,100 jobs from Indiana to Mexico, and instead will keep 1,000 of those jobs in the U.S.

The move comes in the wake of “wide-ranging policy talks” between representatives of the incoming Trump administration and Carrier officials. The New York Times reports that Carrier’s reward for this apparent change of heart will include new tax incentives from the state of Indiana and a commitment from the Trump administration to aggressively pursue federal corporate tax reform in 2017.

Read the full blog

Examining the Three Key Unanswered Questions for Tax Reform in 2017

Citizens for Tax Justice, November 30, 2016

By Richard Phillips

After years of false starts, the passage of a major tax legislation package next year is looking increasingly likely given the election of Donald Trump and unified Republican control of Congress. While lawmakers and commentators agree that something called “tax reform” will move next year, a number of fundamental questions have been left unanswered as to what legislation might look like. Below we review the most critical outstanding questions on the shape tax legislation might take in 2017.

  1. Will tax reform be revenue-neutral or a substantial tax cut?
  2. Will tax reform be passed on a bipartisan basis or through budget reconciliation?
  3. How will lawmakers reform the international corporate tax system?

Read the full blog

Taxing the $2.5 Trillion in Offshore Profits: What’s Ahead for Repatriation?

Citizens for Tax Justice, November 28, 2016

By Richard Phillips

With a Trump administration and Republican-controlled Congress that have similarly-aligned goals for tax reform, the likelihood of a tax reform package being enacted in 2017 is higher than it has been in years. A key component of these discussions will be how to tax $2.5 trillion in collective profits that U.S. multinational corporations have parked offshore to avoid paying U.S. taxes.

U.S. multinationals are avoiding up to $718 billion in taxes on this offshore profit cash hoard.

Read the full blog

Incorporation Transparency

Global Task Force Slams U.S. on Anonymous Shell Companies

FACT Coalition, December 8, 2016

FATF Evaluation Notes the U.S. Anti-Money Laundering “System Has Serious Gaps that Impede Timely Access to Beneficial Ownership Information”

By Clark Gascoigne

Last week, the Financial Action Task Force (FATF)—the international body that sets anti-money laundering and counter-terror financing (AML/CFT) standards—released its first review of the United States’ efforts to combat dirty money since 2006.  While the FATF report finds that the U.S. generally has a decent AML/CFT framework, it notes that there remains a gaping hole in the regime: the problem of anonymous shell companies.

The FATF release states:

“The United States has a well-developed and robust anti-money laundering and counter-terrorist financing (AML/CFT) regime through which it is effectively investigating and prosecuting money laundering and terrorist financing. However, the system has serious gaps that impede timely access to beneficial ownership information.”

Indeed, the U.S. remains one of the easiest places in the world for criminals, terrorists, and kleptocrats to open anonymous shell companies to launder illicit money with impunity, according to leading academics.  That is because no U.S. state requires that information on the true, human owner (known as the “beneficial owner”) of an entity be disclosed to authorities at the time of incorporation…

Read the full blog.
Read a blog by Shruti Shah
Read the full FATF report
Read Reuters’ article
ABA Banking Journal blog

Just Released: Powerful Tools on Company Ownership Transparency For the Business Community

Global Witness, December 2, 2016

By Eryn Schornick and Francie Berger

Starting this week, the business community has an exciting resource in – a new website tailored to businesses and investors that provides information on how to identify the ultimate owners of supplier and partner companies.

“[Company] ownership transparency enables businesses to know who they are doing business with, financial institutions to know who their customers are, citizens to see who benefits from public funds, and law enforcement to hold individuals accountable for crime and corruption.”
– The B Team, The Business Case for Ending Anonymous Companies.—launched at the 17th annual International Anti-Corruption Conference in Panama City, Panama—is a project of The B Team and its partners, Bank of Montreal, Deloitte and Thomson Reuters.

Read the full blog

United States of Anonymity

Kleptocracy Initiative, November 30, 2016

By Casey Michel

In 1966, a memo from a former U.S. State Department official found its way to a staffer at Chase Manhattan Bank. “The U.S.,” the memo read, “is probably the second major flight money center in the world, but with little probability of rivaling Switzerland for the foreseeable future.” Five decades on, that relationship has continued, with Switzerland – as the most recent rankings from the Tax Justice Network’s Financial Secrecy Index indicate – remaining the only country outpacing the United States.

Read the full article

As 2016 draws to a close, new laws to fight corruption in the U.S. and U.K. kick in

Global Witness, December 8, 2016

By Chido Dunn and Stefanie Ostfeld

With 2016 fast drawing to a close (a year which, let’s be honest, has not been without its fair share of political trials and tribulations), there have been two recent and significant moves that are giving us in the anti-corruption community some cause to celebrate.  And with tomorrow being International Anti-Corruption Day, followed by Human Rights Day on Saturday, the timing couldn’t be better.

Two new anti-corruption policies named after Sergei Magnitsky, the whistle-blower who died in prison after reporting one of the largest tax fraud cases in Putin’s Russia, have been introduced in the U.S. and the U.K.

Read the full article

Issues in the News

Incorporation Transparency

End the Corporate Shell Games

Bloomberg, November 30, 2016

By Leslie Caldwell

Leaders from around the globe will converge Thursday in Panama City to discuss the next steps in the international fight against corruption.

That meeting will highlight for the world — and for our newly elected president and Congress — that the U.S. is in danger of falling behind our global partners in preventing the flow of illicit money through our financial markets. We have failed to enact legislation that would require the disclosure of the people behind legal entities — legislation that would assist law enforcement in stopping those who corrupt the U.S. and international financial systems.

Read the full article

How to Hide $400 Million

New York Times, November 30

By Nicholas Confessore

A few weeks after she realized her husband was finally leaving her, Sarah Pursglove flew down to the Bahamas to figure out how much money he really had. Like many woman married to very wealthy men, she didn’t know much about the family accounts. Her husband, a Finnish entrepreneur named Robert Oesterlund, had sworn to a Canadian court that his immediately calculable “net family property” totaled just few million dollars. Pursglove was skeptical. She could come up with several family purchases worth more than that off the top of her head. There was the 165-foot yacht, Deja Vu – that cost a few million dollars a year just to keep on the water. There was the $30 million penthouse at the Toronto Four Seasons, which was still being renovated. It wasn’t their only home. The Deja Vu wasn’t even their only yacht.

Read the full article

Revealed: Coutts managed tax haven firms for controversial clients

The Guardian, December 1, 2016

By Lionel Faull

Coutts, the taxpayer-owned bank, provided offshore services to controversial clients including a member of the Brunei royal family accused of stealing billions from his own country, and a banker charged with assisting the sons of Egypt’s deposed president, Hosni Mubarak, in financial crime.

Known as the Queen’s bank after its most famous customer, Coutts is revealed to have managed secretive tax haven structures for the Sultan of Brunei’s younger brother, Prince Jefri Bolkiah, and the investment banker Hassan Heikal.

Read the full article


Americans Are Paying Apple Millions to Shelter Overseas Profits

Bloomberg, December 7, 2016

By Andrea Wong

Over the years, Apple Inc. has become the poster child for U.S. multinationals accused of sheltering overseas profits to avoid the IRS. What’s gone largely unnoticed is that it’s been paid more than half a billion dollars by the U.S. government to do just that.

Taking advantage of an exemption tucked into America’s Byzantine tax code, Apple stashed much of its foreign earnings—tax-free—right here in the U.S., in part by purchasing government bonds, according to people with direct knowledge of the matter. In return, the Treasury Department paid Apple at least $600 million and possibly much more over the past five years in the form of interest, a Bloomberg review of its regulatory filings shows.

Read the full article

 OECD officials outline international tax initiatives, country-by-country reporting guidance released

MNE Tax, December 5, 2016

By Julie Martin

OECD officials, during a December 5 webcast, discussed OECD international tax work, including just-released guidance implementing the OECD/G20 base erosion profit shifting (BEPS) plan country-by-country reporting standards.

The discussion also covered the G20’s tax agenda, the BEPS multilateral instrument, the status of OECD drafts on profit splits and attribution of profits to permanent establishments, and peer review of the BEPS minimum standards.

Read the full article

Zara Under Fire as Greens Warn EU Tax Dodging Still in Vogue

Bloomberg, December 8, 2016

By Stephanie Bodoni

Inditex SA, the world’s biggest clothing retailer and owner of the Zara and Massimo Dutti brands, used “aggressive” techniques to sidestep at least 585 million euros ($631 million) in taxes from 2011 to 2014, according to Green party lawmakers in the European Parliament.

Without an overhaul of European Union policy, “multinationals and their tax consultants, together with states which choose to engage in destructive tax competition, will continue to get around efforts to clamp down on profit-shifting and tax avoidance,” the Greens/EFA group in the Parliament said in a report released in Brussels on Thursday.

Read the full article

Noose Tightens on Tax Havens in Global Crackdown

Financial Times, December 6, 2016

By Vanessa Houlder

Overlooking white sands and turquoise water, One Cable Beach is the latest oceanfront condominium to be built on the sun-drenched coastline of the Bahamas. Yet its top selling point is not the natural beauty of its surroundings. Instead it is the financial privacy it offers investors trying to escape from a looming crackdown on tax evasion.

Jason Kinsale, the developer, says almost two-thirds of his customers, especially from Europe and Canada, are attracted by the residence rights. They allow property buyers to tell their banks they are tax resident in the Bahamas. “It is a big driver. People don’t like to pay tax in their home country.”

Read the full article