Small Businesses Seek Increased Competition with Disclosures of Tax Havens and Offshoring Act

MAY 11, 2021

RE: Disclosure of Tax Havens and Offshoring Act (H.R. 3007 / S. 1545)

Dear Chairwoman Waters and Ranking Member McHenry / Dear Chairman Brown and Ranking Member Toomey,

As representatives of America’s 30 million small businesses, we write to urge you to support the Disclosure of Tax Havens and Offshoring Act (H.R. 3007 / S. 1545).

Small business owners often find themselves in competition with multinational corporations — that is simply a fact of life for our members. But governments must not put their thumbs on the scale to advantage large companies over small ones — multinationals over wholly domestic ones — especially when those policies present tangible harm to the vast majority of businesses and the larger economy. We are seeking a fair and level playing field.

Numerous studies have found that large, multinational companies in the United States and around the world use provisions in the tax code to shift profits and avoid paying taxes that they would otherwise be required to pay. The effective tax rates of many of the largest U.S. companies are far lower than what is paid by millions of smaller entrepreneurs. A 2019 study by the Institute on Taxation and Economic Policy found 91 profitable Fortune 500 companies paid absolutely no U.S. federal income tax in 2018, and another 56 paid between just 0 and 5 percent.^[1]

The high levels of tax avoidance by large corporations, is estimated by the U.S. Treasury Department to cost the U.S. at least $60 billion a year in lost revenues.^[2] This corporate tax avoidance harms small business competitiveness — increasing the risks to the larger business environment in which we operate in several ways. Small businesses are often the ones asked to pick up the tab to pay for the lost revenue to balance budgets or cover the costs of public services. If taxes are not collected, a lack of adequate revenue can lead to rising public debt, which then impacts our members’ ability to access capital or face deteriorating services that harm the ability of small businesses to attract customers. For example, if there is insufficient funding for new infrastructure projects, a larger chain might be able to build its own access road to its newest superstore, but a local retailer is not able to do the same.

A lack of transparency in tax data likewise presents a major roadblock to better understanding how tax policies impact differing constituencies. We cannot even engage in an informed discussion. Multinational companies rely on the opacity of basic financial information to shift the tax burden to their competitors in the small business community, among others. What little information we do have suggests there is an enormous imbalance.

The OECD’s Inclusive Framework member nations have already agreed to require the largest multinational companies to report some basic financial information at a country-by-country level to tax authorities. While that may well be helpful to certain tax authorities to catch flagrant tax evasion, it is of little use to policymakers and others in efforts to understand whether there exists an equitable distribution of tax responsibilities.

The diverse business organizations signed onto this letter may not all share the same view on what an appropriate tax system looks like, but we are united in a call for the disclosure of the necessary information to engage in a responsible debate. And the majority of small businesses agree: a recent nationwide, scientific poll shows nearly 75 percent of small business owners support legislation that would require multinational corporations to report key financial data on a country-by-country basis.^[3]

To that end, The Disclosure of Tax Havens and Offshoring Act would require multinational corporations to publicly release basic revenue and tax information that they are already required to collect and privately report to the IRS under the OECD agreement. By utilizing an existing framework, the bill minimizes any costs or other burdens on the multinational businesses.

There is growing evidence that tax transparency is becoming an expectation for multinational companies. The Global Reporting Initiative (GRI) has rolled out its new tax transparency standard this year for member companies.^[4] The GRI standard is similar to the provisions in the Disclosure of Tax Havens and Offshoring Act. Several companies have already moved to adopt the standard and many more are considering doing so.

To help level the playing field for small businesses and help to influence the emerging global standard, we urge your support for the Disclosure of Tax Havens and Offshoring Act and encourage you to move the bill through your Committee quickly.

We thank you for your consideration of our views. If you have questions, please feel free to contact Awesta Sarkash (asarkash@smallbusinessmajority.org) at Small Business Majority or Michael Neuwirth (mneuwirth@asbcouncil.org) at American Sustainable Business Council.

Sincerely,

American Sustainable Business Council

Main Street Alliance

Small Business Majority

Cc: Members of the U.S. House Committee on Financial Services

Cc: Members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs

^[1] Matthew Gardner, Lorena Roque, Steve Wamhoff, “Corporate Tax Avoidance in the First Year of the Trump Tax Law”, Institute on Taxation and Economic Policy, December 16, 2019; https://itep.org/corporate-tax-avoidance-in-the-first-year-of-the-trump-tax-law/.

^[2] U.S. Treasury, “The Made In America Tax Plan,” April 2021, p. 11, https://home.treasury.gov/system/files/136/MadeInAmericaTaxPlan_Report.pdf.

^[3] Main Street Alliance, “Release: Small Biz Support Multinational Tax Transparency in New Bill,” October 2020, https://mainstreetalliance.org/press-releases/release-small-biz-support-multinational-tax-transparency-in-new-poll.

^[4] See: GRI 207: TAX 2019, https://www.globalreporting.org/standards/gri-standards-download-center/gri-207-tax-2019/.