Newsletter

Just the FACTs: December 22, 2016

2016 is coming to an end.  This year has certainly been an eventful one—we have witnessed  several document leaks revealing the closely guarded secrets of the offshore world, and a divisive election where the issue of tax avoidance and offshore loopholes were highlighted by both campaigns.

In April, the Panama Papers gave us 14.5 million documents exposing the offshore dealings of the ultra-wealthy, transnational criminals, multinational companies, and even world leaders.  One question often asked when the documents were released “where are the Americans?” the answer simply is that Americans don’t need to go abroad to set up anonymous shell companies.  It is, unfortunately, much easier for Americans to set them up onshore—in states like Nevada, Wyoming, and Delaware.

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Just the FACTs: December 9, 2016

For more than a decade we have seen a steep climb in the amount of money kept offshore by multinational companies.  This has resulted in $2.5 Trillion to remain untaxed—at an estimated cost of $700 billion to the US Treasury.  Throughout the 2016 election, both presidential candidates pledged to close loopholes that allow corporations to dodge taxes and stop companies from booking their profits overseas.  Though the follow-through has yet to be seen.  Many have even argued that Donald Trump’s victory was the result of a frustrated middle class that increasingly feels over-burdened, while they see the wealthy and corporations—following their own set of rules—shifting their responsibilities onto them.

A new report from U.S. PIRG Education Fund finds that multinational companies dodge an estimated $147 billion in federal and state taxes annually through offshore tax haven loopholes, shifting that burden instead onto small businesses and individual taxpayers.  Titled “Picking Up the Tab 2016: Small Businesses Bear the Burden for Offshore Tax Havens,” the study estimates that each small business, on average, owes $5,186 more on its annual tax bill to collectively make up for the federal and state corporate tax revenue lost to offshore tax havens.

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Just the FACTs: November 28, 2016

Increasingly the issues of tax avoidance and financial secrecy are drawing the attention of a broader audience.  Both issues were repeatedly mentioned throughout the presidential election by both candidates.  Donald Trump’s original tax plan even went as far as to end deferral, though updates to the plan in September omitted any position on it.  With the results of the election in, FACT and our members are analyzing what they mean for reform here at home.  More on that in the weeks to come.

The EU commission’s decision in August to force Apple to pay back $14 billion in dodged taxes to Ireland served as a wake-up call to many investors—tax avoidance is a serious risk.  A recent article in the Financial Times, explained how several major funds and investment groups are deeply concerned with companies’ increasing reliance on tax avoidance schemes.  One such fund, Nordea Asset Management—has written to a number of companies—including Alphabet and Apple.  In the letter, they ask that companies lay out their tax risks and that—if they don’t comply by January—they “will rally other investors and propose shareholder resolutions in 2017.”  Four other fund houses in the UK—representing almost £1tn of assets—have also written to the board of Alphabet to raise concerns about its tax arrangements.

 

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Just the FACTs: October 18, 2016

There’s been a lot of talk recently about how the tax system is rigged.  More and more we are seeing that wealthy individuals and powerful multinational companies are able to play by their own set of rules.  According to a new report by FACT members Citizens for Tax Justice (CTJ), the Institute on Taxation and Economic Policy (ITEP), and U.S. PIRG, Fortune 500 companies are now holding $2.5 trillion offshore. By shifting their profits to tax havens, these U.S. companies have been able to avoid $718 billion in taxes. The legal loopholes that allow these companies to avoid their taxes are simply unavailable to average taxpayers and small businesses, who can’t afford to hire the lawyers and accountants to move money through shell companies created in tax havens.

The U.S. Treasury Department took a modest step toward countering corporate tax avoidance Thursday night by issuing a new rule aimed at preventing a tax dodging technique known as “earnings stripping.” While FACT members are still in the process of reviewing the 518-page measure, the rule is estimated to close about $600 million per year in offshore tax avoidance loopholes.

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Just the FACTs: September 16, 2016

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.

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Just the FACTs: September 2, 2016

It is estimated that between $7.6 trillion and $32 trillion in global wealth is secretly stashed offshore in tax havens.  A black hole in the world economy, offshore tax haven abuses drain invaluable resources from each and every country and undermine the rule of law worldwide—hampering our ability to act collectively to solve problems.  This week the European Union indicated that they will no longer tolerate these abuses.

Last week the European Union (EU) sent out a loud and clear message that “all companies, no matter their nationality, generating and recording their profits in an EU country should pay taxes in line with national tax laws”.   This week they followed through by showing the EU is willing to take steps to address aggressive tax avoidance and tax haven countries that facilitate the problem—ruling that Apple must pay Ireland roughly $14.5 billion in back taxes.

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Just the FACTs: August 19, 2016

In May, the Treasury Department released a final rule that was meant to increase scrutiny on banks to know the customers with which they do business.  Despite the fact that we believe the Treasury rule should have been much stronger, banks are on the front-line of the battle against terror financing and criminal money laundering and do have real anti-money laundering obligations.  But, there’s just one problem.  Banks are having a tough time verifying who their customers are because incorporating a company in the U.S. doesn’t require owners to disclose their real names.  Banks are now asking that the federal government change that.

The Clearing House Association, which represents the largest commercial banks, sent a letter to congressional lawmakers in support of the bipartisan Incorporation Transparency and Law Enforcement Assistance Act (H.R.4450, S.2489). The Clearing House includes major banks like Bank of America, Citibank, and JPMorgan Chase, and Wells Fargo. As FACT member  Global Witness explains, “without a way to ensure there’s comprehensive collection of beneficial ownership information for U.S. companies, it will be hard for banks to comply with new regulations that require them to find out who are the beneficial owners of their corporate clients.”

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Just the FACTs: August 5, 2016

It’s no secret, secret shell companies are dangerous.  A report by FACT member Global Witness in early July showed us how these companies are being used to defraud the federal government and put our armed forces at risk.  This week, a new report from another FACT member, Fair Share Education Fund, exposed connections to shell companies and the opioid epidemic.  The report, “Anonymity Overdose”, explains how ending the use of anonymous shell companies could make it significantly harder to keep drug profits hidden from law enforcement.

Likewise, shell companies are often used to launder illicit money through real estate.  A geographic targeting order from the Treasury Department began collecting information on high risk purchases in two of the biggest U.S. housing markets back in March.  According to an article in The New York Times, more than a quarter of the all-cash luxury home purchases made using shell companies in Manhattan and Miami were flagged as suspicious.  The Treasury Department will now expand the program to other major housing markets across the country.

 

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