FOR IMMEDIATE RELEASE
December 15, 2014
More Action on Inversions Needed From Treasury
FACT Lauds Actions Taken, Calls for More
Washington, DC – The FACT (Financial Accountability and Corporate Transparency) Coalition today submitted comments to the Treasury Department praising their previous actions to limit inversions while also calling for additional measures.
The proposals come as a part of the open comment period for Notice 2014-52, Rules Regarding Inversions and Related Transactions, originally issued in September. The guidance laid out several provisions meant to remove some of the incentives behind corporate inversions including “hopscotch” loans and de-controlling strategies. To date, the new rules have been successful in making some corporations reconsider their strategies, most notably AbbVie, which cited the new rules as the primary reason why it halted its planned inversion with Shire Plc.
The FACT Coalition’s comments to Treasury specifically urge it to undertake additional actions to stem the number of inversions, specifically addressing earnings stripping.
Earnings stripping allows companies to avoid U.S. corporate tax by shifting domestic earning to low- and no-tax jurisdictions. In the process, the U.S. part of the company is saddled with debt which is owed to the foreign entity. The interest payments on the debt are often deducted from taxable income, reducing U.S. profits on paper and essentially shifting them to the foreign subsidiary.
FACT also recommends bringing an end to deferral, whereby American multinationals would be required to pay the U.S taxes owed on profits booked offshore when they are earned and not indefinitely putting off payment, as well as urge the Federal government to deny awarding contracts to American companies that have “moved” their headquarters, if only on paper, for overseas for tax purposes.
“Inversions are just one part of a much bigger problem of corporate tax avoidance, and this is an important step in demanding that multinational corporations to pay their fair share,” said Nick Jacobs, Communications Director for the FACT Coalition. “Treasury has helped move the ball forward, but more action is required from Congress.”
“Corporate tax reform is already on the agenda for the next Congress,” continued Jacobs. “Let’s hope that they finally show they can get something done and end these loopholes once and for all.”
“We applaud Treasury for taking action to stop inversions. The faith community is deeply concerned about corporate tax avoidance and its impact on the most vulnerable. We are grateful for Secretary Lew’s leadership on this issue,” said Eric LeCompte, Executive Director of Jubilee USA.
“Tax reform is an opportunity for Democrats and Republicans to work together in the new Congress. The vast majority of the American public wants reform that ends wasteful corporate tax loopholes and tax haven abuse. These are policies that people of faith and both conservatives and progressives can support,” continued LeCompte.
The full text of FACT’s comments to Treasury can be found here.
Founded in 2011, the Financial Accountability and Corporate Transparency (FACT) Coalition unites civil society representatives from small business, labor, government watchdog, faith-based, human rights, anti-corruption, public-interest, and international development organizations. We seek an honest and fair corporate tax code, greater transparency in corporate ownership and operations, and commonsense policies to combat the facilitation of money laundering and other criminal activity by the legitimate financial system.