News & Events

Just the FACTs: November 28, 2016

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.

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State of Play

Increasingly the issues of tax avoidance and financial secrecy are drawing the attention of a broader audience.  Both issues were repeatedly mentioned throughout the presidential election by both candidates.  Donald Trump’s original tax plan even went as far as to end deferral, though updates to the plan in September omitted any position on it.  With the results of the election in, FACT and our members are analyzing what they mean for reform here at home.  More on that in the weeks to come.

The EU commission’s decision in August to force Apple to pay back $14 billion in dodged taxes to Ireland served as a wake-up call to many investors—tax avoidance is a serious risk.  A recent article in the Financial Times, explained how several major funds and investment groups are deeply concerned with companies’ increasing reliance on tax avoidance schemes.  One such fund, Nordea Asset Management—has written to a number of companies—including Alphabet and Apple.  In the letter, they ask that companies lay out their tax risks and that—if they don’t comply by January—they “will rally other investors and propose shareholder resolutions in 2017.”  Four other fund houses in the UK—representing almost £1tn of assets—have also written to the board of Alphabet to raise concerns about its tax arrangements.

Contrary to what information investors are asking for, the SEC has continued its efforts to reduce the amount of information companies disclose to their shareholders.  On Wednesday, November 2nd the comment deadline ended for a proposed rule that ignored the more than 26,000 comments—from a concept release in July—that called for companies to disclose tax information on a country-by-country basis.

Financial secrecy is not just a threat to investors.  In a recent report released by the Hudson Institute’s Kleptocracy Initiative, Ben Judah points out the deep connection between global security and anonymous companies.  In fact, he argues that “almost all the major crises identified in the U.S. National Security Strategy have been worsened by corruption and anonymous companies.”  Shortly before the release of the report, scholars at the Hudson Institute—a conservative think tank—announced in an article their support for action to curtail the abuse of anonymous shell companies.

The Hudson Institute’s scholars join a broad coalition of unlikely bedfellows that have recently come out in support of action to address anonymous shell companies—including senior government officials, law enforcement officers, dozens of NGOs, and a collection of commercial interests that includes all major U.S. banks.  As they point out in their article, “ending criminal secrecy might become that rarest of political beasts: a truly non-partisan issue.”

From the FACT Coalition and Its Partners

Incorporation Transparency

Hudson Institute Highlights Links Between Criminal Secrecy and Kleptocracy

FACT Coalition, October 26, 2016

By Jacob Wills

Scholars at the Hudson Institute recently announced in an article their support for action to curtail the abuse of anonymous shell companies.  The conservative think tank’s Kleptocracy Initiative argues that the U.S. efforts around the world to stabilize governments and root out corruption are being undermined by an irrational contradiction where U.S. laws are at the same time providing a “safe haven to their dirty cash.”

Read the full blog
Hudson Institute article


An Urgent Call to Congress: Ask the Government to Know Who it Does Business With to Protect Us All

Global Witness, October 28, 2016

By Eryn Schornick

The U.S. government has long recognized that it does not have enough information on the identities of its contractors – those that help protect our national security, provide medical and educational services, and build infrastructure.

Take the case of the U.S.-Afghan contractor who funneled at least $3.3 million of U.S. taxpayer dollars to notorious Afghan powerbrokers, who had deliberately hidden their interests in the contractor’s network of companies. These secretive individuals then funded the purchase of weapons for the Taliban and insurgents. Elsewhere, criminals behind the largest U.S. Medicare fraud in history managed to steal over $35 million from the government program by creating at least 118 fake health clinics in around 25 states in the names of companies they secretly owned. For many more examples see Global Witness’ online interactive map where we track the abuse of anonymously-owned companies around the world.

Read the full blog


MSA Speaks Out: Sunlight is the Best Disinfectant in Government Contracting

Main Street Alliance, October 28th, 2016

By Stephen Rouzer

On Friday, October 28, Main Street Alliance policy staffer Michelle Sternthal participated as a panelist in an event, sponsored by Transparency International,  to discuss the harm that anonymous shell companies cause in federal contracting. The other participants included Eryn Schornick, of Global Witness, Gavin Hayman of Open Contracting Partnership, and Chip Cottrell, representing the B-Team.

Read the full blog


Shell Company Nursing Home Fraud

Jubilee USA, October 27, 2016

By Darby Finch

Four men were arrested in Indiana for allegedly using shell companies to defraud nursing home patients in the senior communities where they were executives. They overcharged for drugs and other goods and received the extra money through a shell company. If a vendor questioned the inflated prices, the executives would move on to another company that would pay the prices they were asking. They reportedly used more than twenty shell companies to receive $5.5 million in kickbacks.

Read the full blog


Thousands of Subsidiaries Go Missing From Bank SEC Filings

Bloomberg BNA (Citizens for Tax Justice), October 26, 2016

By Llewellyn Hinkes-Jones

More than 5,300 subsidiaries disappeared from the Securities and Exchange Commission filings of three major U.S. banks—Bank of America Corp., Citigroup Inc., and Wells Fargo & Co.—in the last eight years, according to an analysis by Bloomberg BNA.

Most of the subsidiaries still exist, but loose regulation and enforcement by the SEC allowed them to disappear from public view.

Representatives of the banks told Bloomberg BNA that the change was based on materiality of the subsidiaries, although academics and tax justice advocates highlighted the potential for undisclosed subsidiaries to be used for multimillion-dollar tax avoidance schemes.

Read the full article


EY Created Facebook’s Tax Plan. And Lo, It Was Good, Declared EY

Bloomberg Businessweek (Tyler Gellasch), October 28, 2016

By David Kocieniewski

Investor advocates and former regulators say that in complex transactions involving mergers or reorganizations, it’s important investors get as much independent assessment of a company as possible. “For today’s multinationals, investors have no reasonable way to determine a company’s value unless they know where the company is making its money and what its tax picture looks like,” says Tyler Gellasch, a former counsel to an SEC commissioner.

Read the full article


Companies Engaged in Offshore Shell Games Spending Millions Lobbying Congress

Citizens for Tax Justice, October 20, 2016

By Richard Phillips

A recent analysis by Bloomberg Government revealed that 125 Fortune 500 U.S. multinationals with earnings held offshore spent $230 million lobbying Congress, including on tax issues, in the first six months of 2016.

These and other profitable companies too often claim their tax avoidance strategies are within the boundaries of the law, but they don’t readily reveal how they spend millions lobbying Congress to keep in place or even expand the loopholes that enable rampant tax avoidance.

Read the full blog
Offshore Shell Games 2016 report

Issues in the News

Incorporation Transparency

Secretary of State Atkins to File Anonymous Company Legislation

Portland Business Journal, November 18, 2016

By Matthew Kish

Democratic Secretary of State Jeanne Atkins plans to pre-session file legislation that would rein in abusive, anonymous shell companies, ending speculation about what would happen to the legislation in the wake of the election of Republican Secretary of State Dennis Richardson.

Richardson’s opponent, Labor Commissioner Brad Avakian, had said he would “crack down on shell company abuse and fraud” if elected.

Atkins unveiled the legislation in October, roughly one year after the Business Journal published a three-year investigation that documented Oregon’s emergence as a hotbed for the formation of shell companies used to commit financial crimes.

Read the full article


Panama Joins International Efforts Against Tax Evasion and Avoidance

OECD, October 27, 2016

Panama signed today the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, making it the 105th jurisdiction to join the world’s leading instrument for boosting transparency and combating cross-border tax evasion. The signing shows that Panama is now implementing its commitment to fully cooperate with the international community on transparency.

“Panama’s decision to sign the multilateral Convention is a confirmation of its commitment to take the necessary steps to meet international expectations in the fight against tax evasion,” OECD Secretary-General Angel Gurría said during a signing ceremony with Panama’s Ambassador to France, María Del Pilar Arosemena de Alemán. “It also sends a clear signal that the international community is united in its efforts to stamp out offshore tax evasion. We will continue our efforts until there is nowhere left to hide.”

OECD article
The Wall Street Journal article


Long-Sought ‘Repatriation’ Tax May be Nearing

Politico, November 11, 2016

By Brian Faler

One of the big winners under a Donald Trump administration may be corporations accused by some of dodging taxes.

Trump says he wants to use the money to create jobs here, but economists are skeptical. The proposal is also key to Republicans’ bid to remake the tax code, because they’re relying on the billions in revenue it would generate to make their budget numbers work.

Republicans are proposing to charge as little as 3.5 percent on some overseas money, down from the 35 percent corporations would normally have to pay.

Read the full article

 Levin Expresses Concerns About GOP Approach to Tax Reform

The Hill, November 17, 2016

By Naomi Jagoda

The top Democrat on the House Ways and Means Committee on Thursday expressed concerns about the approach that President-elect Donald Trump and congressional Republicans want to take on tax reform.

At an event hosted by The Century Foundation, Rep. Sandy Levin (D-Mich.) said he was worried that everything wouldn’t be in “good hands” during the next administration.

“And that’s true in terms of tax policy,” he added.

Republicans view next year as the ideal time to pass tax-reform legislation because they will control both houses of Congress and the White House.

Read the full article

 Moscovici Doesn’t Rule Out U.S. Inclusion on Tax Haven Blacklist

Politico, November 11, 2016

By Toby Eckert

European tax czar Pierre Moscovici says no country, including the U.S., should consider itself immune from the tax haven blacklist the European Union is drawing up.

“I’m not going to say who will be on the blacklist, because we are only just starting the process … But every country, potentially, has to fulfill the criteria,” Moscovici said when asked about possible U.S. inclusion on the list in an interview with EurActiv.

Read the full article

 Multinationals May See Shift Toward International Tax Revamp

Bloomberg BNA, November 9, 2016

By Allison Bennett

Incoming President Donald Trump is likely to focus on a push toward international tax overhaul and away from the current U.S. crackdown on inversions and earnings stripping, practitioners told Bloomberg BNA.

“I think all of that goes to the back burner,” Paul Schmidt, chair of tax at BakerHostetler LLP, said Nov. 9. He and other practitioners said with Republican control of both houses of Congress and a Trump White House, the path may be more clear for a broad move to the territorial tax system many multinationals want.

Read the full article

 Aggressive Tax Avoidance Raises Risks For Investors

Financial Times, October 28, 2016

By Aliya Ram

Tax lawyers sometimes tell jokes, one of which goes like this: a man walks into a bar and orders a double Irish with a Dutch sandwich. He asks the bartender: “How much?” The bartender says: “For you Eric, no charge.”

The terms double Irish and Dutch sandwich are used by accountants to describe a popular strategy used by multinational companies to reduce their tax bills by rerouting profits through the Netherlands and Ireland, which can be managed offshore due to a quirk in Ireland’s tax laws.

Read the full article
FACT’s summary of the A Taxing Problem for Investors report
FACT’s A Taxing Problem for Investors report

MSCI Takes Aim at Corporate Tax Avoidance

Financial Times, November 12, 2016

Use of aggressive tax planning will reduce companies’ ratings in ESG index

By Aliya Ram

The world’s most widely used sustainable investment benchmarks will begin penalising companies that use aggressive tax avoidance policies after MSCI, the index provider, said it will change its governance ratings from the start of 2017.

The US-based company, which produces environmental, social and governance indices against which $67bn of assets are benchmarked, told FTfm it has heightened its focus on companies’ tax arrangements because the public mood has shifted against businesses that seek to minimise their tax bills.

Read more…

 The United States Should Fight Against Tax Dodgers, Not For Them

The Washington Post, October 24, 2016

By Carl Levin

Carl Levin, a Democrat, represented Michigan in the U.S. Senate from 1979 to 2015.

Front and center in the presidential campaign is tax avoidance by very wealthy individuals such as Donald Trump and highly profitable corporations such as Apple.

Use of unjustified tax loopholes by individuals and tax havens by multinational corporations has been tolerated for too long. Trump’s tax-avoidance schemes will remain at least partially hidden as long as he gets away with keeping his tax returns secret. But Apple’s tax gimmicks are well known.

Read the full op-ed

 Elizabeth Warren Warns Democrats Not To Cave On Corporate Tax Reform

The Huffington Post, October 23, 2016

By Ryan Grim

Sen. Elizabeth Warren (D-Mass.) is gearing up for a major tax battle next year, warning Democrats not to cave to corporate pressure in a coming push for comprehensive tax reform.

House Speaker Paul Ryan (R-Wis.) and Sen. Chuck Schumer (D-N.Y.), who will become majority leader if Democrats take the upper chamber, have been in talks to reform the tax code in 2017.

Multinational companies are under increasing pressure from tax authorities around the globe, with signs that the era of easy access to tax havens may be coming to an end. With few places left to turn, U.S. companies want to bring their cash home ― but they want to do it without paying the tax they avoided by stashing it offshore to begin with.

Read the full article

Country-by-Country Data Under Microscope: IRS

Bloomberg BNA, October 31, 2016

By Alison Bennett

The IRS has a message for taxpayers giving data to the U.S. and to other jurisdictions under the country-by-country reporting regime: Be consistent and be careful.

“New information is coming into our possession,” Large Business & International Division Commissioner Douglas W. O’Donnell said Oct. 28. “A lot of us are going to have the same information now. Taxpayers need to make sure that what they report to each one of the jurisdictions is the same.”

Read the full article

Watch Out For The Coming Corporate Tax-Break Trickery

The Huffington Post, October 22, 2016

By Dave Johnson

One of the biggest fights coming up in the newly elected Congress next year will be “corporate tax reform.”

If you follow policy news you’ve been hearing that Congress wants to “reform” corporate taxes (again). When you hear talk of “reform” from our corporate-captured Congress it means you need to run as fast as you can — and organize. The way they use the word, it always means give them more and We, the People get less.

Read the full blog