News & Events

Just the FACTs: September 16, 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

In recent years, large multinational corporations have increasingly become reliant on complicated tax schemes to inflate profitability and shareholder value. Apple Inc. learned recently that the public is losing their patience with those who abuse complicated loopholes in the tax system in order to play by their own rules.  The European Commission ruled that Apple accepted illegal state aid through their special tax arrangement with Ireland and will require them to repay $14.5 billion in back taxes.

Apple admitted that the decision would likely have a materially significant impact on shareholder value.  Investors in Apple were unwittingly exposed to high risk since Apple, and other multinationals, do not disclose how much tax and profits they make on a country-by-country basis.

A new report, A Taxing Problem for Investors, published this week by the FACT Coalition, underscores the risks facing investors from the lack of disclosure by multinational companies about their tax practices. With record profits booked offshore, and as governments around the world attempt to deal with growing budget deficits, tax authorities are cracking down on companies (and individuals) who abuse tax avoidance schemes. The disclosure requirements for multinational companies, however, have not kept pace with this changing world. For the market economy to function properly, it is essential for investors and the public to have readily available information about companies that will be sufficient enough to make sound investment decisions.  This argument will feature prominently Tuesday morning at an event that the FACT Coalition is co-sponsoring with the Center for American Progress and a number of other organizations.  For more information about the event, and to RSVP, click here.

Businesses’ tax practices are not the only information that is putting investors in vulnerable positions.  FACT Coalition members Global Witness and Global Financial Integrity recently released a new report, Chancing It: How Secret Company Ownership Is a Risk to Investors. The report explains that businesses that deal with shell companies could be at risk of damaged reputation, loss of profit, or worse.   Ultimately, the report argues that investors should know who owns and controls the companies with which they invest and with whom those companies do business.  Global investors managing over $740 billion in assets backed the report and called for laws that require disclosure of the real owners of American companies.  This influential coalition, including Hermes Equity Ownership Services and Trillium Asset Management, sent letters to Congress calling for an end to shell company secrecy. Read the full letter to the U.S. Senate here and the U.S. House here.

From the FACT Coalition and Its Partners

Incorporation Transparency

New Report: A Taxing Problem for Investors

FACT Coalition, September 12th, 2016

Governments around the globe have begun to crack down on perceived tax abuses to increase corporate tax collections and reverse revenue losses. Companies that depend too heavily on tax avoidance schemes for increasing stockholder value will become riskier investments—putting investors in an ever more financially vulnerable position.

Read the report: (Webpage | PDF)
FACT’s press release
Jubilee USA press release
The Hill: Coalition urges SEC to require disclosure of more tax info
Public Finance International: FACT coalition calls for greater tax disclosure ‘to protect investors’
InsideSources: Sunlight Replaces Shadows as Pressure Grows for More Corporate Transparency

EVENT: Toward A Sustainable Economy — Transparency, Long-Termism, and the SEC

Tuesday, September 20, 2016; 9:30am ET – 11:00am ET

Please join the Center for American Progress Action Fund, the AFL-CIO, Americans for Financial Reform, Ceres, the Financial Accountability & Corporate Transparency Coalition, the International Corporate Accountability Roundtable, the Patriotic Millionaires, Public Citizen, and US SIF: The Forum for Sustainable and Responsible Investment for a discussion on transparency, long-termism, and the state of SEC corporate disclosures.

Read more about the event and RSVP

Ending Apple’s Offshore Tax Dodge

The New York Times, (Main Street Alliance), September 7th, 2016

By Deborah Field

While the [New York Times’] editorial is spot on in calling for an end to the deferral process, it sorely missed the mark in characterizing President Obama’s proposed repatriation rate as “reasonable.” Tax holidays incentivize bad business behavior and reward companies that extract wealth from communities with a deep discount and a clean conscience.

A 14 percent rate on repatriated funds previously held offshore is a handout to large multinational corporations at the expense of small-business owners and our customers. Far from reasonable, it’s been estimated by the Main Street Alliance that the proposed holiday rate would be a $20 billion gift to Apple.

Read the full letter from MSA
The New York Times (Editorial): Apple, Congress and the Missing Taxes
The New York Times (Op-Ed): Elizabeth Warren: What Apple Teaches Us About Taxes

UK Furthers Transparency of Multinational Corporations

Financial Transparency Coalition, September 6th, 2016

By Porter McConnell

On Monday, September 5th, the UK government agreed to an amendment to the Finance Bill that would enable the UK tax authority, HMRC, to publish country by country financial reports of UK-headquartered multinational corporations. Country by country reports show basic information about a multinational’s operations, including taxes paid, number of employees, revenue generated, and profits on a country-level. These reports can give light to abuse of tax laws and aggressive tax avoidance.

Read FTC’s press release
Read The Guardian’s newspaper article


Report: Chancing It: How Secret Company Ownership is a Risk to Investors

Global Witness and GFI, September 7th, 2016

Chancing It shows the scale of that risk, and launches as global investors managing over $740 billion in assets have called for laws that require disclosure of the real owners of American companies.  This influential coalition, including Hermes Equity Ownership Services and Trillium Asset Management has sent letters to Congress calling for an end to shell company secrecy. Read the full letter to the U.S. Senate here and the U.S. House here.

Read the full GW/GFI report: (Webpage | PDF)
Read GW/GFI’s joint press release.
Read FACT’s press release.

How “Shell” Companies Launder Dirty Money

CBS Money Watch (Fair Share), September 8th, 2016

By Ed Leefeldt

Cocaine is big business in Europe these days, according to experts with the U.S. Drug Enforcement Administration (DEA). Boatloads of blow float across the Atlantic Ocean from South America, only to float back as illicit money, which finds its way to states such as Delaware.

But whose pockets does the cash end up in? That’s an investigative dead-end.

Read the full article.

Issues in the News

Incorporation Transparency

Corruption Currents: Denmark Buys Panama Papers Documents

The Wall Street Journal, September 8th, 2016

By Samuel Rubenfeld

Panama Papers: Denmark became the first country in the world to apparently buy data from the leak, and it now plans to investigate whether the Danes named in the documents have evaded taxes. A former Spanish minister who resigned after his name appeared in the leak withdrew an application for a World Bank job. (Guardian, Reuters)

An Indian regulator has been lax over its handling of shell companies and authorities want it to share its data

Read the full article

Will Congress Get Serious About U.S. Offshoring Loopholes?

Foreign Policy, September 1st, 2016

By Anne Usher

Five months after the release of the Panama Papers triggered investigations into the dark corners of international finance, this pressure on Congress is growing. The White House is pushing for a law that would require any company, when it incorporates in the United States, to file accurate information on its true, or “beneficial,” ownership. This data would then be fed into a federal database that law enforcement agencies could access. Without it, Justice Department and Treasury officials argue that the United States will still have a significant impediment when it comes to international efforts to fight money laundering and terrorism financing.

Read the full article

FinCEN Proposes Customer Identification Programs, Anti-Money Laundering Programs, and Beneficial Ownership Requirements for Banks Lacking a Federal Functional Regulator

FinCEN, August 25, 2016

To ensure consistent Bank Secrecy Act (BSA) coverage across the banking industry, FinCEN is proposing to require banks lacking a Federal functional regulator to establish and implement Anti-Money Laundering Programs. FinCEN also is proposing to extend Customer Identification Programs (CIP) requirements and beneficial ownership requirements consistent with the recently implemented Customer Due Diligence amendments to those banks not already subject to these requirements.

Banks without a Federal functional regulator (FinCEN estimates that they number 740 nationwide) are currently covered by many other BSA obligations, including filing suspicious activity reports and currency transaction reports. FinCEN anticipates that banks lacking a Federal functional regulator will be able to leverage existing policies, procedures, and internal controls required by other statutory and regulatory requirements to fulfill the proposed obligations.

Read the full release.
Read the full proposal in the federal register.


EU Commission Names Countries that May Need Tax Avoidance Screening

Reuters, September 15, 2016

By Francesco Guarascio

The European Commission published on Thursday a list of 81 countries and jurisdictions that have a higher chance of facilitating tax avoidance and may be subject to further screening and even sanctions if all EU states agree.

The preliminary lists includes countries and jurisdictions widely seen as facilitators of tax avoidance, such as Panama, Bermuda and Hong Kong. But it also lists economic and political giants like the United States, Japan, China, Australia and Canada.

Read the full article

Obama Administration Targets Corporate Offshore Tax Avoidance

Reuters, September 15th, 2016

By Jason Lange

The Obama administration on Thursday took action to limit the use of foreign tax credits by American multinational companies to reduce their U.S. tax bills, a move that followed an EU order that Apple Inc pay back taxes to Ireland.

The Treasury issued legal guidance reducing the scope companies have to apply foreign tax credits against their U.S. tax obligations.

Read the full article

Apple Ruling Could Drive US Corporate Tax Reform

Financial Times (Editorial), September 11th, 2016

The European Commission’s ruling that Apple should pay Ireland more than €13bn in back taxes has prompted yells of outrage in the US. The US Treasury accused Brussels of “overriding national tax authority”, while the White House press secretary has fumed at the “unfairness” of the move.

Americans could usefully channel some of their outrage at the state of their own corporate tax system. At 35 per cent, its headline rate is among the highest in the developed world, and 13 percentage points above that of the EU average. Some companies pay full whack. Others — generally those large and wealthy enough to support networks of overseas subsidiaries — pay lower rates than the norm. The glaring loophole is that worldwide income is only taxed on repatriation. This leads to an absurd situation where some $2tn in US corporate profits is warehoused offshore. Apple alone accounts for a startling $200bn of this sum — much of it siphoned through the now compromised Irish conduit.

Read the full article

Ireland Doesn’t Want Apple’s Back Taxes, But the Irish Aren’t So Sure

The New York Times, September 11th, 2016

By Mark Scott

When European officials ordered Ireland to collect a record $14.5 billion in back taxes from Apple, Kieran O’Connell drew up a wish list for spending the money.

But Ireland doesn’t want Apple’s billions. Instead, the Irish government is appealing Europe’s tax ruling, a move that is exposing a rift in a country still feeling the aftershocks from years of harsh cutbacks.

Local lawmakers, in part, worry that taking the tech giant’s billions could scare off other multinationals from investing in Ireland just as other countries vie to entice them. Many people across the country are also upset that European officials are meddling with the country’s tax policies. Apple, which is also appealing, is taking the same stand, calling the case “politically motivated”.

Read the full article