Just the FACTs: November 17, 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 jwills@nullthefactcoalition.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