News & Events

Just the FACTs: March 10, 2017

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

Anonymous companies have opened the U.S. real estate market to the corrupt and criminal.  Towers of Secrecy, a series in the New York Times, started highlighting the abuse of these companies through opaque real estate deals back in 2015.  What they found was shocking: a Malaysian kleptocrat allegedly using US real estate to launder over $1 billion in stolen funds, a developer shielded from accountability while ignoring zoning laws, and people being defrauded from their homes with no hope for recourse.

Partially inspired by the series, last January, the Financial Crimes Enforcement Network (FinCEN), a branch of the U.S. Treasury Department, announced Geographic Targeting Orders (GTOs) aimed at uncovering these secret deals. The GTOs required U.S. title insurance companies to identify the natural persons, or beneficial owners, behind shell companies used to pay “all cash” for luxury real estate in the Miami and New York metropolitan areas for a six-month period. The GTOs were extended and expanded to the Los Angeles, San Antonio, San Diego, and San Francisco areas in July.

Recently, the agency announced that it would again renew the orders. In the announcement, FinCEN noted that about 30 percent of the transactions covered by the GTOs are raising red flags for law enforcement.  In a statement, FACT commended the agency for continuing this step (albeit modest) towards ending the abuse of anonymous companies in the real estate sector.  FACT’s Clark Gascoigne articulated what these opaque deals mean for everyday people “The secrecy has turned luxury real estate into safety deposit boxes for the world’s criminals and corrupt — all while artificially inflating property values and pricing future generations of Americans out of the housing market.”

Secrecy in real estate has now become so out of hand that government agencies are unable to even find out who they rent from. In an investigation conducted by the Government Accountability Office (GAO), GAO was unable to identify the owners of one-third of the government’s leases at high-security spaces as of March 2016.  The investigation was meant to identify potential risks posed to government facilities and agencies, which lease high-security space from foreign owners.  Investigators admitted other risky leases were probably missed because they were unable to identify the ultimate or “beneficial owners”, of leasing companies. In a blog, Global Witness’ Eryn Schornick highlighted some of the most troubling findings from the report.

A thorough analysis from the Institute on Taxation and Economic Policy (ITEP) — a member of the FACT Coalition — published Thursday reveals widespread tax avoidance by the largest U.S. companies in recent years.  While the statutory corporate tax rate is 35 percent, the study reveals that, of the 258 Fortune 500 companies which recorded profits every year between 2008 and 2015, these companies paid an average effective rate of 21.2 percent — with many paying far less.  Following the launch of the study, Sen. Bernie Sanders (I-VT), Sen. Brian Schatz (D-HI), and Rep. Jan Schakowsky (D-IL) introduced the Corporate Tax Dodging Prevention Act that takes aim at offshore tax avoidance by closing a number of loopholes in the tax code.  FACT noted in a statement this morning that “The comparatively simple reforms in this legislation would curb the gaming of the tax code and ensure that wholly domestic and small businesses can compete more fairly with multinationals.”

One of the purported benefits of the House leadership’s tax reform blueprint is that it supposedly ends the offshore gaming of the tax code — but (in contrast to the Corporate Tax Dodging Prevention Act) that’s clearly not the case.  Another recent report from ITEP explains that, contrary to what some have claimed, the House blueprint fails to curtail tax avoidance.  According to ITEP’s analysis, the plan would merely change the nature of the gaming, trading incentives to shift profits for ones that promote shifting sales. In response, FACT’s Clark Gascoigne released a statement calling the plan “a gift to creative tax planners.”  For tax reform to be effective, it should address the loopholes that allow for tax avoidance by 1) ending deferral, 2) strengthening anti-inversion rules, and 3) boosting transparency of where multinationals book profits and pay taxes.

From the FACT Coalition and Its Partners

Incorporation Transparency

FinCEN’s Continued Effort to Purge Dirty Money from Real Estate Welcomed by Experts

FACT Coalition, February 23, 2017

By Clark Gascoigne

Statement by the FACT Coalition on Treasury’s Decision to Renew Geographic Targeting Orders to Identify Buyers in Luxury Real Estate

The Geographic Targeting Orders (GTOs), require U.S. title insurance companies to identify the natural persons, or beneficial owners, behind shell companies used to pay “all cash” for luxury real estate in the Los Angeles, Miami, New York, San Antonio, San Diego, and San Francisco metropolitan areas for a six-month period.  In announcing the renewed GTOs, FinCEN noted that “about 30 percent of the transactions covered by the GTOs involve a beneficial owner or purchaser representative that is also the subject of a previous suspicious activity report. This corroborates FinCEN’s concerns about the use of shell companies to buy luxury real estate in ‘all-cash’ transactions.”

Read the full news release
FinCEN news release

The US Government Has No Way of Telling Who is Behind the Companies it Does Business With, or What Risk They Pose to Our Security

Global Witness, March 7, 2017

By Eryn Schornick

The U.S. government goes to great lengths to protect our national security.  And yet, our failure to manage company ownership in this country leaves us exposed to all sorts of risk. Put simply, it is way too easy for the criminal or corrupt to hide their ownership of U.S. property behind a fake company, or a series of companies in order to stash or move their dirty money without detection.

Let me give you an example. In 2013, a Global Witness undercover investigation exposed how the former Chief Minister of Sarawak in Malaysia, Abdul Taib Mahmud, and his family used their political status to buy land and forest concessions for way less than their commercial value. Swathes of the Sarawak rainforest were destroyed as a result of these schemes, as well as various abuses committed against the rightful land owners. The Chief Minister’s brother used his secretly owned Singaporean company to hide profits from those corrupt forest and land deals and so that he could avoid paying around $10 million in taxes.

Read the full blog

The Big Spin: Corruption and the Growth of Violent Extremism

Transparency International, February 2017

By Lt Col Dave Allen, GBR-A; Will Cafferky; Abdallah Hendawy; Jordache Horn; Karolina MacLachlan; Stefanie Nijssen; Eleonore Vidal de la Blache

The Big Spin: Corruption and the growth of violent extremism finds that organizations including ISIS take advantage of corruption in their efforts to recruit and retain disillusioned members, even as they use corrupt practices to channel funds and smuggle arms, drugs, and people. Corruption also can dramatically weaken state institutions, rendering them ineffective in the face of the threat from extremist groups.

Read the full report

New Brief Highlights Who Really Makes the Rules on Illicit Flows

Financial Transparency Coalition, February 23, 2017

It is prevailing wisdom that a country’s head of state, minister of finance, or other elected officials would be the ones setting the rules of its financial system. Taxation, finance and monetary systems are cited as the quintessential “sovereign” issues, where a state exercises full control. But this is not always the case. While national-level leaders certainly play a role, there are dozens of global institutions setting standards and writing rules. Elected officials may have little to no say in these standards, but they are often obliged to follow them. These decision-making bodies wield significant influence over the international financial system, but most people have never even heard of them.

Read the full brief

Good News From Slovakia: Light Cast Onto Shell Companies

Tax Justice Network, March 7, 2017

Second time lucky? About a year ago in Slovakia, some opposition politicians pushed hard for a promising law to shed light onto anonymous ownership through shell companies. The Tax Justice Network supported their efforts by writing a letter to the Prime Minster at the time. Despite widespread public anger about corrupt practices, the law was blocked by the legislature. Now, after a second attempt, the law has been passed, pretty much in its original form. This is great news.

Read the blog

Glencore’s $75 Million Payments Show Why the Eiti Must Enforce Project-Level Reporting by Oil and Mining Companies

Global Witness, March 7, 2017

By Dominic Eagleton

Tomorrow the Extractive Industries Transparency Initiative (EITI), a global scheme of 51 implementing countries that aims to stop corruption in the oil, gas and mining industries, will meet in Bogota to make critical decisions about a game-changing measure known as project-level reporting.

Rea the full blog

Trusts- The Hole in the EU’s Response to the Panama Papers

Global Witness, February 22, 2017

By Murray Worthy

Just under a year ago, the Panama Papers revelations shone an unprecedented spotlight on the offshore world – showing how financial secrecy enabled the activities of tax evaders, criminals the corrupt.

In the wake of the revelations, the European Commission has proposed improvements to the EU’s anti-money laundering rules – including cracking down on the use of anonymous companies and trusts. While these proposals are a welcome step forwards, particularly ending anonymous companies across Europe, the proposals leave an easy escape route for criminals through the use of trusts – as our new briefing Don’t take it on trust reveals

Read the full blog

The UK’s Tax Havens: Top 10 Corruption Cases Involving Anonymous Companies

Global Witness, February 21, 2017

By Murray Worthy

Today, MPs have the opportunity to vote on whether to effectively end the use of anonymous companies in the UK’s overseas tax havens. Almost a year ago the Panama Papers demonstrated their importance, with more than half of the companies involved registered in the UK’s Overseas Territories. The proposed measure would give the UK-linked Overseas Territories, such as British Virgin Islands and Bermuda, until 2020 to introduce public registers of the true beneficial owners of companies, as the UK did last year.

Read the full blog

Oregon Lawmakers, Law Enforcement Back Shell Company Legislation

Portland Business Journal (OSPIRG, MSA Oregon), March 6, 2017

By Matthew Kish

House Bill 2191 would require disclosure of who owns a company. No state requires the collection of such information, which is why some say the legislation has “national implications.” It also would give the secretary of state investigative authority and more heavily regulate those who form numerous companies.

Read the full article


Report Shows House Tax Plan Fails to Curb Tax Avoidance

FACT Coalition, February 22, 2017

By Clark Gascoigne

A new report published Wednesday by the Institute on Taxation and Economic Policy (ITEP) explains—among other things—how the House tax plan fails to curtail tax avoidance, contrary to the conventional wisdom in Washington.  ITEP is a member of the Financial Accountability and Corporate Transparency Coalition (FACT Coalition), an alliance of more than 100 state, national, and international organizations working toward a fair tax system that addresses the challenges of a global economy.

Read the full news release
Read FACT’s brief memo: tax reform – important steps to fix the gaming of the corporate system
Read ITEP’s full report
Citizens for Tax Justice blog

The 35 Percent Corporate Tax Myth

Institute on Taxation and Economic Policy, March 9, 2017

“This study is a long-term, unprecedented examination of corporation taxes paid—or not paid—by the nation’s biggest, most profitable firms,” said Matthew Gardner, an ITEP senior fellow and lead author of the report. “It reveals that many of the big corporations that are lobbying for a lower corporate tax rate to be more ‘competitive’ already pay substantially less than the 35 percent statutory rate.”

Read the full report
Read the fact sheet
Read the press release
Download the corporate data
Read the blog
The New York Times article: Profitable Companies, No Taxes: Here’s How They Did It

New Bill Takes Aim at Offshore Tax Avoidance

The Hill, March 9, 2017

By Clark Gascoigne

Legislation introduced by Sen. Bernie Sanders (I-VT), Sen. Brian Schatz (D-HI), and Rep. Jan Schakowsky (D-IL) Thursday takes aim at offshore tax avoidance by closing a number of loopholes in the tax code.

The bill was filed following the publication of a thorough analysis from the Institute on Taxation and Economic Policy (ITEP) — a member of the FACT Coalition — revealing widespread tax avoidance by Fortune 500 companies in recent years.

“The Corporate Tax Dodging Prevention Act offers a pragmatic, enforceable response to the problem of offshore tax avoidance — a problem that costs U.S. taxpayers an estimated $135 billion per year.  This bill ends the incentive to game the tax system without creating a litany of new problems and unintended consequences.”
– Clark Gascoigne, Deputy Director of the FACT Coalition

Read FACT’s full statement.
Read the article in the Hill.
Read the press release from Sen. Sanders.
A section-by-section summary of the Corporate Tax Dodging Prevention Act.
Read the full ITEP report “The 35 Percent Corporate Tax Myth: Corporate Tax Avoidance by Fortune 500 Companies, 2008 to 2015.

CAT Raid Raises Key Question: Will Team Trump be Tough on Tax Shelters?

Crain’s Chicago Business (FACT, Elise Bean), March 3, 2017

By Claire Bushey

It’s unusual for law enforcement agents to raid the office of a Fortune 100 company. But the tax strategy that brought the feds to Caterpillar’s door is common.

Read the full article

Fiscal feminism: fighting for women’s rights through tax justice this International Women’s Day

Center for Economic and Social Rights, March 2017

Having helped spearhead efforts to bring human rights to bear in tax policy, CESR is bringing a fiscal focus to IWD 2017 by energetically supporting the Global Days of Action on Tax Justice for Women’s Rights, a campaign initiative by the Global Alliance for Tax Justice (GATJ) and partners including CESR, the Association for Women’s Rights in Development (AWID), Christian Aid, Action Aid, Oxfam, Tax Justice Network and the Global Unions. From March 8 to March 24, civil society will mobilize in dozens of countries around the world to challenge the women’s rights abuses inherent to unjust systems of taxation.

Read the full story

Corporate Taxation Key to Protecting Human Rights in the Global Economy

Center for Economic and Social Rights, March 2, 2017

Corporate taxation remains an under-explored yet critical piece of the business and human rights puzzle, as confirmed by various participants in the discussion. Alongside the more direct ways businesses can adversely impact human rights (such as labor abuses, water pollution, etc.), the amount of tax corporations pay, and where they pay them, has profound human rights implications. All human rights, particularly economic and social rights, have financial costs. Yet, as the Luxleaks and Panama Papers scandals showed, tax dodging remains rife in the global economy. When companies hollow out the State’s ability to resource and realize economic and social rights by evading or avoiding paying their fair share of tax, they are indirectly responsible for human rights infringements.

Read the full blog

What Do They Pay? Towards a Public Database to Account for the Economic Activities and Tax Contributions of Multinational Corporations

Financial Transparency Coalition, Open Knowledge International and Tax Justice Network, February 17, 2017

This paper reviews the prospects for a global public database on the tax contributions and economic activities of multinational companies. It is divided into four main sections. Firstly, we present a set of user stories, questions, requirements, and scenarios of usage for a database. Secondly, we look at what kinds of information a public database could and should contain. Thirdly, we look at the opportunities and challenges of building a public database drawing on various existing information sources. Fourthly and finally, we suggest next steps for policy, advocacy, and technical work towards a public database.

Read FTC’s brief
Read the full report

Ecuador Poised to Take Historic Stand on Tax Havens

Financial Transparency Coalition, February 22, 2017

Alongside national elections, voters in Ecuador went to the polls over the weekend to decide the fate of what became known as the ‘tax haven referendum’, a yes-or-no vote to bar public servants from holding assets in jurisdictions that are designated to be tax havens. A yes vote would make it illegal for public servants to keep money stashed in these jurisdictions. With 92 percent of votes counted, ‘yes’ has a large lead, with 55 percent of the vote, making approval of the measure highly likely.

Read the full press release

Issues in the News

Incorporation Transparency

Why Big Banks Want a Ban on Anonymous Shell Companies

American Banker, March 7, 2017

By Kevin Wack

The biggest U.S. banks are throwing their considerable weight behind proposed legislation that would force shell companies to identify their owners in state government filings.

In a report issued last month, a trade group for the nation’s largest banks recommended that Congress prevent the 50 states from allowing the anonymous ownership of corporations. The report was written by The Clearing House, whose owners include JPMorgan Chase, Citigroup, Bank of America and Wells Fargo.

Read the full article

U.S. Emerging as ‘Leading’ Tax, Secrecy Haven, EU Report Says

Bloomberg BNA, March 8, 2017

By Joe Kirwin  

The U.S. is emerging as a “leading tax and secrecy haven for rich foreigners” because of its resistance to global tax disclosure standards and the array of tax-free facilities available for non-residents, according to a European Parliament report.

Released March 7—two weeks before European Union lawmakers visit Washington D.C. and Delaware to probe money laundering and tax evasion issues— the report says U.S. states such as Nevada, Wyoming, South Dakota and Delaware are attracting money flows from around the world because of laws that permit beneficial owners of companies to remain anonymous.

Read the full article

Despots’ Jackpots: Why it is so Difficult to Hold Kleptocrats Accountable

The Economist, February 25th, 2017

Despite improvements, fighting grand corruption remains a struggle

Corruption is never far from the front page. In recent weeks, thousands of Romanians protested against plans to decriminalize low-level graft, and Rolls-Royce was hit with a £671m ($835m) penalty for alleged bribery. Meanwhile, long-running corruption scandals continue to roil political and corporate leaders in Brazil and Malaysia. The growing attention has spurred governments to pledge action, as dozens did at a global anti-corruption summit in London last year.

Jason Sharman, professor of international relations at Cambridge University, is particularly interested in “grand corruption”: the theft of national wealth by kleptocratic leaders and their cronies, often in poor (albeit resource-rich) countries. It is a subject he knows well, having spent over a decade studying the offshore centers and vehicles—shell companies, for example—that are used to hide ill-gotten gains.

Read the full article

HSBC Sets Aside $773 Million for Tax Authority Investigations

Bloomberg BNA, February 22, 2017

By Ben Stupples

HSBC Holdings Plc, the U.K.’s largest bank by market capitalization, has made a $773 million allowance within its accounts for ongoing tax authority investigations, according to its 2016 annual report.

London-based HSBC said Feb. 21 that it is the focus of investigations in the U.S., France, Belgium, Argentina and India on claims of tax fraud, money laundering, and illegal cross-border activity.

Read the full article

Moldova art exhibit illustrates $1bn banking fraud

BBC News, February 17, 2017

The 10 huge piles of fake $100 bills are on display at a library in the capital, Chisinau, each weighing a hefty 500kg (78.7 stone), the Pro TV news website reports.

They represent the $1bn that disappeared from three banks in 2014, equivalent to an eighth of the ex-Soviet republic’s entire GDP. The money was transferred to shell companies abroad, a fraud that prompted months of anti-government protests in Europe’s poorest country.

The exhibition is the work of artist Stefan Esanu who says he wanted to help people visualize how much money was stolen. “People have no idea what a billion means. It is like saying ‘cosmos’ but people cannot imagine what this really means,” he tells the Report news website. The exhibition also includes interviews with 33 Moldovans on their impressions of the scandal.

Read the full article


Caterpillar Is Accused in Report to Federal Investigators of Tax Fraud

The New York Times, March 7, 2017

By Jesse Drucker

For years, federal investigators have been scrutinizing Caterpillar’s overseas tax affairs with no resolution to the examinations of the complex maneuvers involving billions of dollars and one of the company’s Swiss subsidiaries.

Now, a report commissioned by the government and reviewed by The New York Times accuses the heavy-equipment maker of carrying out tax and accounting fraud. It is extremely rare to accuse a big multinational company of tax fraud, which could result in high penalties.

Read the full article

The IRS Pays Whistleblowers to Turn in Tax-Evaders

Yahoo Finance, February 24, 2017

By Ethan Wolff-Mann

Since President George W. Bush signed the Tax Relief and Health Care Act of 2006, the IRS has had a program that rewards Americans who inform the agency on tax dodgers. In its first decade, the program has helped the IRS recover $3.4 billion, and resulted in payouts of $465 million to whistleblowers.

Read the full article

Burger King Makes Billion Dollar Bid for Popeyes in Giant Tax-Avoidance Scheme

Think Progress, February 22, 2017

By Alan Pyke

The Brazilian investment firm behind Burger King is looking to absorb Popeyes in a $1.8 billion acquisition. The deal would bring a windfall for Popeyes shareholders — and drill another hole in America’s leaky tax bucket.

If the deal goes through, Popeyes would become part of a conglomerate whose tax headquarters is in Canada. Burger King shifted its revenue across the border back in late 2014. It bought Canadian donut shop Tim Horton’s that winter to set up an accountant’s sleight-of-hand trick called an “inversion.”

Read the full article

Irish Government Spent $467,000 on Report Defending Apple’s Tax Arrangements

Apple Insider, February 20, 2017

By Malcolm Owen

The commissioned report was compiled by consultancy firm PricewaterhouseCoopers, reports the Irish Journal, and is said to have supported Apple’s allocation of profits to Irish operations in a tax-efficient manner. While officials for the European Commission did not request the report from the Irish government, the report was handed over in February 2016 to help both it and Apple’s case in the Commission’s investigation.

The report was provided to Commission officials months before the regulator ruled the country provided “illegal tax benefits” worth 13 billion euros ($13.8 billion.)

Read the full article