Newsletter

Just the FACTs: July 18, 2018

After 2 years of bipartisan negotiations, without warning or fanfare, the leadership of the U.S. House Financial Services Committee stripped beneficial ownership provisions out of a bipartisan anti-money laundering bill and planned a Committee vote.

A decision was made to drop beneficial ownership because it was thought to be controversial and a stripped down bill would “pass easily.” However, as FACT’s executive director describes in this op-ed in the American Banker, that was simply not the case.   

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Just the FACTs: April 19, 2018

In January, we were optimistic that this would be the year anonymous companies would end.  Since then, the momentum for disclosure has only grown. Legal scholars and international affairs experts have recently called for action, a recent poll showed overwhelming support from small businesses, and a report from Fair Share reminded us that anonymous companies are continuing to fuel the opioid epidemic.  Between these and a recent investigation by Reuters that found Russians are using a web of anonymous companies to skirt U.S. sanctions and boost the government of Syria’s Bashar al-Assad, Iran’s Revolutionary Guard, and the Hezbollah militia, the arguments for secrecy are becoming more and more invalid.

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Just the FACTs: February 23, 2018

Movements to end anonymous shell companies exploded in 2017, already this year the momentum has ballooned.  With several committees in the House and Senate taking up the issue and a broad-based, bipartisan coalition calling for action, the previously elusive transparency measure is no longer a long-shot.

Two recently released reports exemplify why the momentum needs to continue.  The 2018 Financial Secrecy Index provides insight into secrecy jurisdictions globally and the Polaris Project’s report, Human Trafficking in Illicit Massage Businesses, reveals (among other things) how the abhorrent industry of sex trafficking is shielded behind anonymously registered businesses.

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Just the FACTs: November 17, 2017

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.

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Just The FACTS: August 21, 2017

More corrupt officials face consequences as reverberations from the Panama Papers continue. Pakistan’s Supreme Court has indefinitely disqualified the prime minister, Nawaz Sharif, from public service after the prime minister and his children were implicated in dubious real estate transactions in London. A subsequent investigation showed his family owned luxury real estate properties through anonymous companies. Based on their income, it was unlikely they could afford the properties, suggesting they were potentially hiding stolen assets and engaging in illicit financial practices. In a blog responding to the action taken by the supreme court, Global Witness’ Naomi Hirst noted this as an example of how anonymous companies are used to embolden corrupt officials and called on leaders to fulfill their promises to eliminate them.

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Just the FACTS: July 27, 2017

Over the past several decades, anonymous shell companies have been at the heart of heinous crimes, including cases of grand corruptionhuman trafficking, and even the facilitation of the opioid epidemicDidier Jacobs of Oxfam America highlighted some of the blights of anonymous companies in a recent blogIn it, he describes how drug lords, corrupt politicians, and human traffickers are able to perform illegal acts while hidden from justice by a veil of anonymity. With shielded identities, criminals can effectively function above the law.

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Just the FACTS: June 15, 2017

For the second time, Wells Fargo was found liable for a tax penalty in connection with an abusive tax shelter.  This points to a broader trend where companies’ abusive tax schemes are being exposed to increasing public discontent.  In the case of Wells Fargo, a jury in Minnesota had previously nixed $350 million in foreign tax credits finding that they “lacked both economic substance and a non-tax business purpose.” Now, a federal court has found them liable for a 20% negligence penalty from the IRS. The court’s decision is yet another example that the tax gimmicks employed by multinationals to inflate profits are becoming riskier.

In a blog, FACT’s Jacob Wills explained the current climate around tax fairness, “Scandals have shaken public confidence in the integrity and fairness of the tax system at a time when tightening budgets and increasing deficits are leading to calls for austerity and scaling back on long relied upon public services.”

It should be no surprise that tax avoidance schemes face increased scrutiny, a recent report suggests that the ultra-wealthy are dodging more in tax than many had previously estimated.   Economists Annette Alstadsæter, Niels Johannesen, and Gabriel Zucman took data from two tax haven leaks — the Panama Papers and Swiss leaks — in order to get more accurate estimates of tax evasion.  Their findings: the ultra-rich — on average — evade about 30% of their due taxes, compared to the average evasion rate of 2.9%.

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Just the FACTs: May 19, 2017

Profits booked offshore are growing at an even faster pace than previously predicted. Earlier this month, Apple made waves when it disclosed that of its more than $250 billion in cash worldwide, $239 billion is kept offshore.  Some of the growth in cash booked offshore is likely due to the perception that Congress and the administration are inching ever closer to a deal that would allow these companies to return the money at a steep discount.

One plan presented by Democratic Representative John Delaney equates to a corporate hand-out of nearly $550 billion.  In a recent blog, the Institute for Taxation and Economic Policy analyzes the plan disguised as a pay-for for infrastructure spending.  There is no doubt with a backlog of $836 billion in much-needed repairs, investments in infrastructure need more funding. However, as ITEP argues, this plan will only make the problem of inadequate revenue worse.

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Just the FACTs: April 12, 2017

Last April, the world’s attention was captured by a global investigation revealing more than 11 million documents from a Panamanian law firm documenting a secret financial network reserved for the wealthy and corrupt.  Now, one year later, the “Panama Papers” was just awarded the prestigious Pulitzer Prize for Explanatory Reporting, while experts are reflecting on how far we’ve come and how much farther we really need to go.  There is no doubt that the “Panama Papers” release reverberated throughout the world, but—with the extent of the problem the information exposed—it’s clear not enough has been done.

In a statement marking the the anniversary, FACT’s Gary Kalman graded the global response to the Panama Papers a “C-”, calling the progress “more scattershot than comprehensive.”  Though some real progress has been made, more must be done, especially when it comes to ending the abuse of anonymous companies.  In a blog that followed, he further reflected on this past year and made a prediction for the future—saying he is optimistic that, by the next anniversary, our grade will improve.

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Just the FACTs: March 24, 2017

The use of tax haven loopholes by multinational companies costs American taxpayers more than $130 billion per year.  Outright tax evasion by wealthy individuals drains an additional $35 billion annually.  At a time when budgets are being slashed and taxpayers are being asked to forgo much-needed services, Congress should be working to protect taxpayers with real tax reform that addresses the real problem.  Unfortunately, the proposed House tax reform blueprint doubles down on loopholes that facilitate the gaming of the tax code.

Even if the proposed House tax reform package were effective at ending the gaming — it isn’t — its effects on many would still be devastating.  According to the architect of the plan, Alan Auerbach, the blueprint’s currency adjustment will cause U.S. investments in foreign assets to plummet by 20%, at a cost of nearly $2 trillion.  Other researchers estimate the cost at nearly $5 trillion.

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