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 jwills@thefactcoalition.org.
State of Play
When the Panama Papers were released just a little over a year ago it sent shockwaves throughout the world. The massive scale of the leak and the VIP’s that it implicated outraged a public that had already seen the wealthy and corporations as not paying their fair share. Though, with all that the leak revealed, an important question was on everyone’s minds, where are the Americans? This past week, it seems, we found them.
The Paradise Papers—a leak of 13 million documents from Appleby, a large offshore law firm—contains details on tax avoidance techniques of at least 31,000 U.S. citizens, residents and companies. This includes household names like Apple, Nike, and Uber. While governments have moved to crack down on tax avoidance schemes, documents in the leak show how Apple and Nike were able to outrun regulators by exploiting gaps between differing tax codes.
Just a few days before the leak, House leaders released a tax plan that rewards companies for creating complicated tax avoidance structures like those found in the leak. It is, in effect, a gift to the multinational companies that have dodged taxes for years by offshoring profits and jobs with an estimated $458 billion tax giveaway on the profits that are currently offshore. In 2004, a similar measure was used in an effort to create jobs yet the multinationals who benefited most from the repatriation holiday slashed 20,000 U.S. jobs over the next two years.
This giveaway rewards corporations who have moved jobs and profits out of the U.S., but — even worse — the bill creates permanent incentives to move jobs, profits, and production offshore in the future. The plan establishes what is known as a ‘territorial’ tax system, whereby profits booked offshore by multinational companies would be permanently exempt from U.S. taxes. The lower offshore rate further incentivizes large corporations to use accounting gimmicks employed by firms like Appleby to book more and more profits offshore and to outsource production and jobs to tax haven countries. A concern echoed by Sen. Ron Johnson (R-WI) , who this week announced his opposition to the Senate bill.
If there was one takeaway from the Paradise Papers, it’s that our tax system is broken. Yet, neither the tax plan that the House of Representatives passed on Thursday nor the one that the Senate is considering offer solutions for any of the loopholes exposed by the leak. The House and Senate plans miss an opportunity to once and for all address structural inefficiencies and loopholes that allow the few and privileged to avoid tax at the expense of everyone else. At the very least, the leak should concern lawmakers enough to review their changes and how they impact these massive loopholes.
While Congress moves in one direction, shareholders are moving in another. This Wednesday, the AFL-CIO and Domini Impact Investments filed a shareholder resolution calling on Nike — which was exposed in the Paradise Papers — to clean up its act and adopt responsible tax principles.
From the FACT Coalition and Its Partners
Tax
House Passes Bill that Offshores American Jobs and Profits
FACT Coalition, November 16, 2017
The U.S. House of Representatives on Thursday passed the “Tax Cuts and Jobs Act” (H.R. 1) — legislation that will reward offshore tax haven abuse and increase the incentive to outsource American jobs abroad, according to the Financial Accountability and Corporate Transparency (FACT) Coalition. The bill applies a near zero percent tax rate to profits booked in foreign countries compared to a 20 percent tax rate for profits booked in the U.S.
Read the full statement
Read Main Street Alliance’s statement
Read the statement from the Institute on Taxation and Economic Policy
Read the US PIRG statement
Shopping for a Tax Haven: How Nike and Apple Accelerated Their Tax Avoidance Strategies, According to the Paradise Papers
ITEP, FACT Coalition, November 16, 2017
By Steve Diese,
It is no secret that corporations like Nike and Apple are holding billions of dollars offshore for tax avoidance purposes, but the Paradise Papers give us a deeper look into what these tax avoidance schemes look like, and show that Apple’s leadership has aggressively moved to reinvent these schemes while simultaneously proclaiming their innocence.
Read the full blog
House Tax Plan Would Make Offshore Tax Avoidance Substantially Worse
ITEP, FACT Coalition, November 9, 2017
By Richard Phillips,
The Sunday release of the Paradise Papers has once again brought the issue of offshore tax avoidance to the forefront of public discussion. The papers expose the complex structures that companies such as Apple and Nike have pursued in recent years to pay little to nothing in taxes on their offshore earnings.
Yet even as these revelations make headlines, House leaders are moving forward with major tax legislation, the Tax Cuts and Jobs Act, that would reward the worst tax avoiders and make it even easier for multinational companies to avoid taxes.
Read the full blog
Sen. Johnson (R-WI): Senate Tax Bill Incentivizes Offshoring of Jobs and Production
FACT Coalition, November 15, 2017
In announcing his opposition to the Senate tax plan Wednesday, Sen. Ron Johnson (R-WI) mentioned that the bill’s shift to a so-called “territorial” tax system — whereby corporations are not taxed on their offshore profits — is one of the things that concerns him. “With a territorial system, there will be a real incentive to keep manufacturing overseas,” Mr. Johnson is quoted as saying by The Wall Street Journal.
Read the full statement
House Guts Safeguard, Increases Offshoring Incentives in Tax Bill
FACT Coalition, November 8, 2017
The U.S. House Ways and Means Committee’s amendments to the proposed tax legislation Monday evening nearly eliminated a safeguard in the tax bill meant to discourage some shifting of profits offshore by multinational corporations, according to a score by Congress’s Joint Committee on Taxation (JCT).
Read the full statement
New Offshore Leak Raises Concerns about House Tax Bill
FACT Coalition, November 5, 2017
A new leak of documents from an offshore law firm, published by an international network of news outlets Sunday, expose a number of tax avoidance techniques used by the wealthy and multinational corporations to avoid taxes.
Read the full statement
Read the statement from the Institute on Taxation and Economic Policy
Read US PIRG’s statement
Read Global Financial Integrity’s statement
Read Jubilee USA’s statement
Read Global Witness’ statement
House Bill a Gift to Offshore Tax Dodgers and Outsourcers
FACT Coalition, November 2, 2017
The U.S. House Ways and Means Committee unveiled legislation Thursday that would overhaul the U.S. tax system. According to the Financial Accountability and Corporate Transparency (FACT) Coalition, the bill would reward corporations that have shifted profits to tax havens.
Read the full statement
Read Public Citizen’s statement
Read Main Street Alliance’s statement
Read US PIRG’s statement
Read the statement from the Institute on Taxation and Economic Policy
Territorial: The Hidden Danger Beneath the Tax Rate Debate
FACT Coalition, October 26, 2017
By Jacob Wills
Our tax system is fundamental to our democracy, delineating who pays the costs of a functioning civilization. But the system is broken, leaving an undeniable imbalance between the working and middle-classes and the wealthy and multinational companies. It would seem to follow then that the focus of tax reform should be around correcting this imbalance by targeting those that have gamed the system and flagrantly avoided taxation. Yet, the priority for Congress and the administration seems to be to exacerbate tax avoidance with greater incentives for shifting profits offshore.
Read the full blog
Republican Tax Bills Would Be Paradise for Plutocrats
FACT Coalition, The Washington Post, November 14, 2017
By Katrina vanden Heuvel
The Paradise Papers — the trove of 13.4 million documents leaked largely from the files of Appleby, a Bermuda-based law firm — detail the many ways the biggest corporations and richest individuals use tax havens to avoid taxes, obscure ownership and hide financial transactions. Reporters have only just begun to comb through the documents, but two things are already clear: First, Leona Helmsley was right when she famously said, “Only the little people pay taxes.”
Read the full article
Scientific Opinion Poll: Small Business Owners Say Tax Fairness is More Important Than Tax Cuts
Small Business Majority, October 26, 2017
Small business owners think they are at a disadvantage under the current tax system, and they want to see fair and responsible tax reform rather than tax cuts that will blow up the deficit
Washington, DC—A scientific opinion poll released today found lawmakers who are pushing tax cuts over tax reform are on the wrong path as far as small business owners are concerned.
Read the full release
New FAQ Explains Why Cutting Taxes for Corporations and the Wealthy Does Nothing to Help the Middle Class
EPI, October 3, 2017
In a new FAQ, EPI Research Director Josh Bivens and Tax and Budget Analyst Hunter Blair answer a series of questions about taxes and claims that tax cuts can help middle-class families. Bivens and Blair debunk several myths that are continually cited in favor of tax cuts, including the notion that the U.S. corporations pay significantly more than their international peers, and the argument that cutting corporate taxes would boost job creation, wage growth, or investment.
Read the full release
Multinational Corporations Would Receive At Least $458 Billion in Tax Breaks from Congressional Repatriation Proposals
ITEP, November 5, 2017
For years, one of the driving forces in the corporate tax debate has been how to best deal with the ever-growing stash of Fortune 500 multinationals’ profits being booked offshore, which as of this year stands at more than $2.6 trillion. According to an analysis by the Institute on Taxation and Economic Policy (ITEP), companies owe an estimated $752 billion in taxes on these offshore earnings.
Read the full report
Fact Sheet: Apple and Tax Avoidance
ITEP, November 5, 2017
Apple is the most valuable public company of all time with a market value of more than $800 billion.Last year, it cleared $45.7 billion in profits after taxes, making it the most profitable company in the Fortune 500 for the third straight year.
Apple is also particularly adept at avoiding U.S. taxes on these gargantuan profits. The major strategy Apple uses to reduce its U.S. tax bill is to artificially shift large amounts of its domestic profits into tax havens. This allows Apple to avoid paying U.S. taxes on these profits while also paying very little in foreign taxes. This is possible due to a loophole in the tax code called “deferral” that allows U.S. multinational corporations to forego taxes on profits of their foreign subsidiaries until they are paid as dividends to the U.S. parent company.
Read the full fact sheet
Fact Sheet: Nike and Tax Avoidance
ITEP, November 5, 2017
Nike earned more than $10 billion in U.S. profits from 2008 to 2015 but only paid 18.6 percent in U.S. federal taxes during this time. This is just over half of the official U.S. corporate tax rate of 35 percent.
Read the full fact sheet
Fact Sheet: Facebook and Tax Avoidance
ITEP, November 5, 2017
Since Facebook became a public company, its annual revenues have increased by 250 percent from around $8 billion in 2013 to nearly $28 billion last year. In the same time period, the company’s before-tax profits shot up four-and-a-half fold to $12.5 billion. But in this time it has also managed to avoid billions of dollars in U.S. taxes.
Read the full fact sheet
Offshore Shell Games 2017
ITEP and U.S. PIRG, October 17, 2017
U.S.-based multinational corporations are allowed to play by a different set of rules than small and domestic businesses or individuals when it comes to paying taxes. Corporate lobbyists and their congressional allies have riddled the U.S. tax code with loopholes and exceptions that enable tax attorneys and corporate accountants to book U.S.-earned profits in subsidiaries located in offshore tax haven countries with minimal or no taxes. Often a company’s operational presence in a tax haven may be nothing more than a mailbox.
Read the full report
International Evidence Shows That Low Corporate Tax Rates Are Not Strongly Associated With Stronger Investment
EPI, October 26, 2017
The Trump administration’s Council of Economic Advisers (CEA) released a paper last week arguing that cuts in the statutory corporate tax rate would lead to gains in business investment, productivity, and wages. I noted in a piece released yesterday why this was unlikely to be true.
The key piece of evidence the CEA claimed was “highly visible in the data” and showed the wage-boosting effect of corporate tax cuts was simply a graph that showed faster unweighted wage growth in just two years in a set of “low-tax” countries relative to a set of “high-tax” countries.
Read the full blog
Big Pharma a Big Winner in Proposed Tax Plan
Public Citizen & ITEP, November 3, 2017
The tax proposal supported by President Donald Trump and congressional
Republicans would give five top pharmaceutical corporations a $46.8 billion tax break.
The Big Pharma corporations, whose offshore tax holdings and estimated tax bills were
revealed in recent reports by the Institute on Taxation and Economic Policy and Americans
for Tax Fairness, collectively hold more than $290 billion offshore, much of which is booked
to their 200 tax haven subsidiaries across the globe.
Read the full report
Corporate Tax Sellout
Public Citizen, November 3, 2017
By Susan Harley
Yesterday, the House Republicans released bill text for their tax giveaway plan—and the details are just as cruel and morally backward as we’d expected: it takes from the needy to give to the rich, it showers tax breaks on campaign donors, and it lets tax dodgers off the hook while kicking open the door to accounting trickery that will lead to the type of tax base erosion the rest of the world is working to combat.
Read the full blog
Nathan Proctor: Republican Assault on Small Business
The Berkshire Eagle, November 10, 2017
By Nathan Proctor
“The most excited group out there are big CEOs, about our tax plan.”
There is a reason that Gary Cohn, White House economic advisor, has noticed the excitement from big CEOs over the current tax plan. The tax plan, which will be voted on by the full U.S. house in the next week, is targeted at helping not just businesses in general, but large multinational businesses in particular.
Read the full Op-ed
After ‘Paradise Papers,’ Democrats Call on GOP to Slow Down Tax Bill
FACT Coalition, Bloomberg Politics, November 5, 2017
By Lynnley Browning
House Republicans should slow down their consideration of a tax-overhaul bill after investigative reports Sunday alleged offshore tax-avoidance by U.S. multinational companies including Apple Inc. and Nike Inc., congressional Democrats and tax-advocacy groups said.
Read the full article
How Corporations and the Wealthy Avoid Taxes (and How to Stop Them)
FACT Coalition, The New York Times, November 10, 2017
By Gabriel Zucman
The United States loses, according to my estimates, close to $70 billion a year in tax revenue due to the shifting of corporate profits to tax havens. That’s close to 20 percent of the corporate tax revenue that is collected each year. This is legal.
Meanwhile, an estimated $8.7 trillion, 11.5 percent of the entire world’s G.D.P., is held offshore by ultra-wealthy households in a handful of tax shelters, and most of it isn’t being reported to the relevant tax authorities. This is… not so legal.
Read the full Op-ed
‘Paradise Papers’ Puts Corporate Tax Avoidance on Center Stage
FACT Coalition, The Wall Street Journal, November 7, 2017
By Samuel Rubenfeld
The latest round of leaks of offshore incorporation documents, known as the “Paradise Papers,” put a spotlight on Americans and companies and their use of such vehicles to avoid paying taxes.
Read the full article
Tax-Cut Debate in U.S. Congress Swings to Senate Bill
FACT Coalition, Reuters, November 8, 2017
By Susan Cornwell, Amanda Becker
A U.S. Senate tax-cut bill, differing from one in the House of Representatives, was expected to be unveiled on Thursday, complicating a Republican tax overhaul push and increasing skepticism on Wall Street about the effort.
Read the full article
Nike Shareholders to Propose Tax Principles After Paradise Papers Leak
FACT Coalition, The Street, November 15, 2017
By Laura Berman
In the wake of the Paradise Papers revelations about tax avoidance, the AFL-CIO and Domini Impact Investments LLC, a provider of socially responsible mutual funds, is asking Nike Inc. to adopt formal tax practice principles.
Read the full article
Bill Gates, Jeff Bezos, and Warren Buffett Own More Wealth Than the Entire Poorest Half of the US Population
FACT Coalition, The Nation, November 13, 2017
By Michelle Chen
As treasure troves of the super-elite’s untold trillions glisten in offshore tax havens, Main Street is sinking in an underwater economy. Drowning in debt, clinging to the tatters of the welfare state, the gulf between the richest few and the rest of us could now widen even further with a new GOP tax bill loaded with another corporate bounty of loopholes, more tax “incentives,” and more trickle-up economics designed to concentrate as much wealth in as few hands as possible.
Read the full article
Incorporation Transparency
Paradise Papers: Global Witness Statement on Wilbur Ross, Offshore Secrecy and Beneficial Ownership Transparency
Global Witness, November 5, 2017
Leaked documents published today by the International Consortium of Investigative Journalists expose how offshore tax havens, white-collar professionals, and anonymous company owners hide their finances behind a veil of secrecy. The documents from Bermuda-based law firm Appleby include evidence of dubious deals and holdings involving the Queen of England, Canadian Prime Minister Justin Trudeau’s chief fundraiser, and Trump appointed U.S. Commerce Secretary Wilbur Ross.
According to the documents, Wilbur Ross used a constellation of companies, some with their ownership undisclosed. The companies were set up by Appleby to retain shares in Navigator Holdings, a shipping firm with business ties to a Russian oligarch subject to American sanctions.
Read the full release
The United States’ Problem With Financial Secrecy
Hudson Institute, Council on Foreign Affairs, September 20, 2017
By Casey Michel
The Panama Papers leak of eleven million documents in April 2016 revealed that former Iraqi Prime Minister Ayad Allawi, the brother-in-law of Chinese President Xi Jinping, longtime friends of Russian President Vladimir Putin, drug kingpins, and even a soccer megastar had something in common: they all channeled money through anonymous shell companies. Anonymous shell companies are entities that usually employ few or no workers, do not conduct any substantive business, and allow their owners to store or route money while hiding their identities.
Read the full report
Charges Against Manafort Throw Light on America’s Secret Financial Havens
Hudson Institute, The Washington Post, October 31, 2017
By Casey Michel
Off all the information contained in yesterday’s bombshell indictment of Paul Manafort, one significant fact has gone unremarked. According to the indictment, Manafort was linked to nearly a dozen limited liability companies (LLCs) that helped to funnel cash from accounts in places like Cyprus and the Seychelles. Notably, though, these LLCs weren’t based in traditional offshore havens like Panama or the British Virgin Islands. Instead, they were in Washington’s backyard, in states like Delaware, Virginia, and Florida. Little noticed by most Americans, the United States has become one of the world’s leading offshore havens.
Read the full article
Money Laundering Reforms Can Help Fight Human Trafficking
Medium, November 2, 2017
By Nathan Proctor
How can we ensure we foster a society and a world where people are not enslaved? Here another way: Go after the money.
It’s not a mystery why people exploit others in forced labor or sex work. They do it to make money. Take away that money and trafficking would stop. And you can help.
Read the full Op-ed
The Morning Risk Report: Indictment Reveals Laundering Methods
WSJ, November 3, 2017
By Samuel Rubenfeld
The allegations against Paul Manafort, the former chairman of the Trump presidential campaign, may have revealed the broad scope of the investigation, but they also showed the myriad ways prosecutors say people can launder their money, experts said. Mr. Manafort has pleaded not guilty, and the case could go to trial by April.
Read the full blog
Issues in the News
Tax
Former Pentagon Chiefs to Congress: If You’re Serious About Defense, Don’t Pass Current GOP Tax Bill
Washington Post, November 15, 2017
By Ed O’Keefe and Karoun Demirjian
Three former secretaries of defense are warning lawmakers not to enact proposed Republican tax restructuring plans, arguing they will jeopardize future military spending.
Read the full Op-ed
Proposed Tax Plan Is Ripe for Abuse
The Century Foundation, October 27, 2017
By Reuven Avi-Yonah
The “Unified Framework for Fixing Our Broken Tax Code” (the “Framework”) released by the “Big Six” group of Treasury, White House, and congressional leaders on September 27 has been the focus of a lot of commentary. Most of this analysis has focused on the distributive aspects of the plan and on the proposed rate structure, as well as the impact on revenues and the federal deficit.
Read the full report
The Use of Tax Havens to Avoid Paying Taxes Will Soon be ‘Unacceptable,’ Says PwC
Business Insider UK, October 30, 2017
By Camilla Hodgson
“Big Four” accountancy firm PricewaterhouseCoopers (PwC) has predicted the use of tax havens by companies and individuals to avoid paying tax will soon become “unacceptable.”
In an Asset & Wealth Management report released on Monday, PwC said the public was increasingly hostile towards those perceived to be not paying their “fair share” of tax, and that businesses would need to put more effort into tax transparency in future.
Read the full article
The Tax Havens at the Heart of the Manafort Indictment
The Atlantic, October 30, 2017
By Krishnadev Calamur
Paul Manafort, President Trump’s former campaign chairman, and Richard Gates, Manafort’s business partner, are alleged by an indictment to have, among other things, laundered money through shell companies and foreign bank accounts in Cyprus, Seychelles, and St. Vincent and the Grenadines. (Both have pleaded not guilty to the charges in the indictment, which include money laundering.)
Read the full article
How Trump’s Corporate-Tax Plan Could Send American Jobs Overseas
The Atlantic, November 1, 2017
By Gene B. Sperling
President Trump and his Council of Economic Advisors argue that cutting the corporate tax rate would be a major boon to American workers, in that it would substantially boost their household income. This is, as many economists and journalists have pointed out, wrong.
Read the full Op-ed
This Isn’t Reagan’s Tax Reform
U.S. News, November 10, 2017
By former Rep. Claudine Schneider (R-RI)
Enacting comprehensive reform to the federal tax code is not an easy task. I know this firsthand because I voted to do just that when I was a member of the House of Representatives in 1986, the last time Congress passed major tax reform legislation. But my fellow Republicans don’t seem to have learned the lessons of President Ronald Reagan’s reform efforts.
Read the full Op-ed
The Paradise Papers are a Wake-Up Call: now Congress Must Act on Tax Havens
The Guardian, November 10, 2017
By Senator Sheldon Whitehouse
Appleby Global Group Services Limited is a very old law firm with a very old mission – helping wealthy people and corporations avoid scrutiny. Beginning on Sunday, the International Consortium of Investigative Journalists began releasing findings from a trove of 13.4m documents from Appleby and its subsidiaries. The media has dubbed these the “Paradise Papers”, and they are deeply troubling.
Read the full Op-ed
Incorporation Transparency
Seems like Paul Manafort sucked at laundering money
Vice News, November 1, 2017
By David Gilbert
Money laundering can be relatively easy if you know what you’re doing, though changes to the banking system in recent years have made it tougher to move large sums without attracting attention. But Paul Manafort made a series of mistakes that experts say made it easier for special counsel Robert Mueller’s team to track his cash.
Read the full article