June 16, 2021
Today US Senator Chris Van Hollen (D-Md.) Welcomed the passage of the Tax Havens and Offshoring Act in the House of Representatives as part of the broader ESG Disclosure Simplification Act. Introduced by Senator Van Hollen and Rep. Cindy Axne, D-Iowa, this bill will provide investors and the public with transparency about corporate use of tax havens and tax incentives to outsource American jobs. The bill requires public corporations to disclose their financial reporting on a country-by-country basis so Americans can see the extent to which they are abusing tax havens or relocating jobs.
“Americans have a right to know how our broken tax system rewards companies that move jobs abroad. As we work with President Biden to repair the damage caused by 2017 Republican tax fraud and to create jobs here at home through the American Jobs Plan, I am delighted that the House of Representatives is passing our laws to shed light on the Games pursuing big businesses Shift profits overseas and avoid paying taxes to support public investment here at home. Sunshine is the best disinfectant, and exposing these loopholes is critical to closing them. I will work to get this passed in the Senate, ”said Senator Van Hollen.
Under applicable law, a U.S. company can use Foreign Tax Credits (FTC) to reduce U.S. tax liability on foreign profits based on the amounts the company paid in taxes on those profits. While this makes sense on a country-by-country basis, as suggested by President Biden in the American Jobs Plan, the use of a mixed or “global tax rate” in the 2017 Tax Act for the minimum tax on foreign corporate profits gives companies a perverse incentive to reallocate jobs and activities overseas avoid the minimum tax on profits posted in tax havens.
The Tax Haven and Offshoring Disclosure Act would provide more transparency on this issue by:
- Require large corporations to disclose basic information about each of their subsidiaries and country-specific financial information that summarizes all of their subsidiaries in each country – including profits, taxes, employees, and property, plant and equipment.
- All of this information is already reported to the IRS under an international OECD framework, but this would ensure public disclosure to provide data on how international tax laws work and where companies locate their business and taxes.
A letter from investors with nearly $ 2.9 trillion in assets under management who support this legislation can be found here. A letter from small business groups that support this legislation can be found here. A letter from non-profit organizations that support this law can be found here.
“Corporate tax avoidance and profit shifting by hugely profitable multinational corporations makes the global tax system unfair for small businesses and hard-working Americans,” said Ian Gary, executive director of the Financial Accountability and Corporate Transparency (FACT) Coalition at the launch. “Our coalition strongly supports the Tax Haven and Offshoring Disclosure Act as it provides a much-needed spotlight on corporate profit shifting and tax avoidance strategies, both to protect investors and to inform policy makers and the public.”
“Some of the largest corporations in America are using accounting gimmicks to pretend their profits are made in offshore tax havens and avoid paying their fair share of taxes to the U.S. corporations have grown,” said Amy Hanauer, executive director of the Institute for Tax and Economic Policy (ITEP) at the introduction.
This legislation is supported by Senators Amy Klobuchar (D-Minn.), Tammy Duckworth (D-Ill.), Sheldon Whitehouse (DR.I.), Bernie Sanders (I-Vt.), Dick Durbin (D-Ill.) carried along. , Richard Blumenthal (D-Ct.) And Tina Smith (D-Minn.).
The House version is presented by MPs Jennifer Wexton (VA-10), Stephen Lynch (MA-08), Brad Sherman (CA-30) Jim Cooper (TN-05), Eleanor Holmes Norton (DC-AL), Don Beyer (VA-08), Chuy Garcia (IL-04) and Raul Grijalva (AZ-03).
A page on the law can be found here. You can find the invoice text here.
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