Here is the State of Play
Many Major U.S. Multinationals Will Be Forced to Report on their Tax Practices Under New Australian Tax Transparency Law
On November 29, the Australian Parliament passed long-awaited corporate tax transparency legislation mandating public country-by-country reporting (CbCR), which is projected to cover as many as half of all major U.S. multinationals. The legislation’s passage – after nearly two years of revisions and debate – was hailed by FACT and allies CICTAR, Tax Justice Network, Oxfam Australia, ITEP, as well as global unions and other advocates.
In a statement, FACT policy director Zorka Milin noted that the broad applicability of Australia’s new reporting rules makes a strong case for harmonization around a new global standard: a standard that the U.S., as home to a plurality of all multinationals globally, is best placed to set.
“As many U.S. companies prepare to begin reporting under Australia’s new law, we must ensure that all major multinationals are playing by the same set of rules,” she said. “Only full, public disclosures covering every jurisdiction will serve to level the playing field and meet a new global standard of transparency, to the benefit of investors, policymakers, governments, and honest taxpayers around the world.”
In July, FACT filed a petition with the U.S. Securities and Exchange Commission on behalf of 87 investors with more than $2.3 trillion in assets under management calling for the introduction of just such requirements for U.S.-listed companies.
While Australia’s new public CbCR law does not require reporting for every jurisdiction that a given multinational operates in, it still represents a massive leap forward over other corporate tax reporting regimes, including the EU’s public CbCR Directive and the OECD’s CbC reports that are filed confidentially and exchanged between governments. Under the new Australian requirements, large multinationals with substantial activities in Australia will soon begin disclosing comprehensive tax and operational data for a wide variety of notorious tax havens, including Bermuda, Hong Kong, Singapore, and Switzerland, none of which are currently subject to reporting requirements under any other mandatory public CbCR standard.
Treasury Appeals Texas Judge’s Nationwide Injunction Against Corporate Transparency Act
On Friday, the Treasury Department appealed a recent preliminary injunction against enforcement of the landmark Corporate Transparency Act (CTA), the most consequential U.S. anti-money laundering law in a generation. The injunction in question was issued by Texas District Judge Amos Mazzant in response to a motion from plaintiffs in Texas Top Cop Shop, Inc., et al. v. Garland, with the court finding the CTA “likely unconstitutional as outside of Congress’s power.”
In a statement released shortly after Judge Mazzant ordered the injunction, FACT executive director Ian Gary characterized the ruling as “a Christmas gift to criminals who use anonymous shell companies to traffic fentanyl, exploit people, and hide dirty money.”
“The law is clearly constitutional and Congress was well within its powers to pass the law to defend America and protect our financial borders,” said Gary. “Multiple other federal courts have reached the opposite conclusion and denied injunctions in similar cases, so we expect the government to move to stay this outlier order promptly.”
The CTA – which requires certain legal entities to provide basic identifying information on their true, or “beneficial”, owners – passed with the support of the former Trump Administration and represents the most substantial improvement to the U.S. anti-money laundering framework in decades. Anonymous shell companies have long been the premier vehicle for criminals to launder the profits of corruption, drug and human trafficking, and other illicit activities in the U.S. economy. This regulatory blindspot has for decades contributed to the U.S.’ status as, in the words of Treasury Secretary Janet Yellen, perhaps “the best place to hide and launder ill-gotten gains.”
FACT in the News
Wall Street Journal: Treasury Appeals Court Ruling Blocking Corporate Ownership Registry Drive
FACT executive director Ian Gary’s statement on the recent injunction against enforcement of the CTA ordered by a Texas federal district court judge was featured in coverage by the Wall Street Journal’s Dylan Tokar. Gary’s comments were also picked up in coverage by Thomson Reuters, Forbes, and other national outlets. Other FACT staff were also quoted in CNBC and Bloomberg Law.
Bloomberg Tax: Transparency Group Lauds Passage of Australia Tax Reporting Law
Ian Gary was also quoted in coverage of Australia’s world-leading new public CbCR standard by Bloomberg Tax.
“This new law will provide the public with a deep look into the tax and operational practices of many of the world’s largest corporations, some of whom use profit-shifting and other strategies to dodge billions of dollars in taxes every year,” said Gary. “This information will be massively useful to policymakers, investors, and other interested parties, and should trigger a domino effect of new tax transparency requirements in other jurisdictions, including the United States.”
ICIJ: Inside Big Oil’s War Against Transparency
FACT executive director Ian Gary and policy director Zorka Milin were quoted in ICIJ’s recent coverage of the U.S. oil industry’s fight to prevent new payments to governments disclosures under Dodd-Frank Section 1504.
“On this issue they threw everything against it,” said Milin. “They had high-powered lawyers and lobbyists. They even dragged the Chamber of Commerce into it. And yes … they did have some legal and political victories along the way, but in spite of it all … we’ve got these disclosures which they never wanted to see the light of day.”
FACT program director for environmental crime and illicit finance Julia Yansura was quoted in recent coverage by El País’ of the difficulties surrounding financial investigations of environmental crimes in the Amazon. FACT allies and partners Bram Ebus from International Crisis Group and Melina Risso from Instituto Igarapé are also quoted.
“When investigating (environmental) crimes, authorities often focus on the goods themselves and the routes they take. Unfortunately, there has been less focus on the money that drives these crimes,” said Julia Yansura, author of the study and Director of the Environmental Crime and Illicit Finance Program at the FACT Coalition. “You can seize illegally-sourced goods every day, but you cannot prevent criminal groups from re-emerging without attacking their finances.”
From Our Allies
On Monday, Transparency International UK and other advocates praised the appointment of “tireless campaigner” Margaret Hodge as the nation’s new Anti-Corruption Champion.
In a statement, Duncan Hames, Director of Policy and Programmes at Transparency International UK, said that “Baroness Hodge is uniquely positioned to drive forward the Government’s ambition to make the UK the anti-corruption capital of the world…Holding government departments to account on their anti-corruption commitments and demanding the highest standards of government itself will be essential if she is to restore confidence in this vital work.”
Hodge’s appointment was accompanied by the announcement of £36 million in new funding for the National Crime Agency’s International Corruption Unit, as well as the deployment of new sanctions targeting several key players in the “Gold Mafia” at the centre of the illicit gold trade in Southern Africa.
Recent Events
FACT policy director Zorka Milin spoke as part of a virtual panel organized by Small Business For America’s Future on the upcoming expiration of many provisions of the 2017 Tax Cuts and Jobs Act (TCJA). Milin’s remarks focused on policies that should be considered by Congress in 2025 to level the playing field for small businesses, who routinely pay higher levels of tax than major U.S. multinationals due to extensive loopholes favoring offshore income.
On December 11, FACT’s Julia Yansura spoke at a panel titled Disruption of Illicit markets and illicit financial flows at the Regional Security and Justice Summit in Barbados. Yansura’s presentation focused on strategies to disrupt illicit finance linked to environmental crime.
December 12-13: Annual Institute on Current Issues in International Taxation
The 35th Annual Institute on Current Issues in International Taxation will be held on December 12 and 13 at the JW Marriott Hotel in downtown Washington, D.C.
The Annual Institute is co-hosted by GW Law and the Internal Revenue Service (IRS), and covers global developments and trends in international taxation, including international corporate taxation, from a practitioner and enforcement perspective. FACT will be attending both days of this year’s Annual Institute, as well as the preceding half-day conference What Will Survive, What Will Thrive in ’25?, held on Wednesday, December 11 from 12:30-5:30 PM. If you plan to attend, please find us at the venue to say hello!
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