Congressional Democrats have reintroduced legislation in the House and Senate to shed light on the use of corporate tax havens and incentives for outsourcing jobs abroad,
The Tax Haven Disclosure and Offshoring Act, reintroduced on Tuesday, by Rep. Cindy Axne, D-Iowa, and Sen. Chris Van Hollen, D-Maryland, would require public companies to disclose their country-by-country financial reports so Americans can see how much they are abusing havens tax or relocate jobs.
The bill is part of the Biden administration Made in America tax plan, which was deployed last month in conjunction with its American employment plan (see the story). The Biden plans aim to reduce profit shifting by multinational corporations and remove incentives for offshore investment by enacting a country-by-country minimum tax.
“Americans have a right to know when companies are using incentives in our tax system to ship jobs overseas or abuse offshore tax havens,” Van Hollen said in a statement Tuesday.
Corporations can use foreign tax credits to reduce their tax payable in the United States on foreign profits based on the amounts the company has paid in taxes on those profits. The Tax Cuts and Jobs Act of 2017 authorized the use of a blended rate or “all-in rate” for the minimum tax on foreign company profits, but supporters of the new legislation argue that this encourages companies to move their jobs and operations abroad to avoid the minimum tax on profits recorded in tax havens.
The Tax Havens Disclosure and Offshoring Law would require large corporations to disclose basic information about each of their subsidiaries and provide country-by-country financial information that summarizes all of their subsidiaries in each country, including profits, taxes, employees and tangible property. assets. All information is already reported to the Internal Revenue Service, under an international framework of the Organization for Economic Co-operation and Development, but the bill would require public disclosure of data on the operation of international tax laws and on the where companies locate their business activities and pay their taxes.
âShedding light on these practices will help investors and the public understand the risks that SOEs take in trying to make additional profits,â Axne said. “Our legislation would help level the playing field, improve transparency for investors and hold companies operating tax havens accountable to public scrutiny.”
The legislation is co-sponsored in the Senate by Senator Amy Klobuchar, D-Minnesota; Tammy Duckworth, D-Illinois; Sheldon Whitehouse, D-Rhode Island; Bernie Sanders, I-Vermont; Dick Durbin, D-Illinois; Richard Blumenthal, D-Connecticut; and Tina Smith, D-Minnesota. The House version is co-sponsored by Rep. Jennifer Wexton, D-Virginia; Stephen Lynch, D-Massachusetts; Brad Sherman, D-California; Jim Cooper, D-Tennessee; Eleanor Holmes Norton, DD.C. ; Don Beyer, D-Virginia; Chuy Garcia, D-Illinois; and Raul Grijalva, D-Arizona.
âSome of the biggest American companies are using accounting tricks to pretend their profits are made in offshore tax havens and thus avoid paying their fair share of taxes in the United States,â said Amy Hanauer, executive director of the Institute on Taxation and Economic Policy, in a report. âThis legislation takes a very reasonable step in letting lawmakers and the public know what these companies are doing. “
The Internal Revenue Service receives more tax information from companies than it publicly publishes, and by providing more public disclosure, it could help outsiders spot non-compliance.
âThe IRS has struggled to effectively identify pockets of tax non-compliance in large businesses,â said Treasury Inspector General for Tax Administration J. Russell George during prepared testimony for a Congressional hearing Tuesday on the tax gap, tax non-compliance and the role of offshore tax evasion. âFor example, we reported that IRS audits of large companies using the Discriminant Analysis System Selection Tool had a no-change rate of almost 55%. Audits that do not result in any change can inefficiently consume IRS resources and place a burden on taxpayers who comply with tax laws. TIGTA analyzed the potential cost of excessive time charged for unchanged returns, i.e. time greater than 200 hours, and estimated that potentially $ 22.7 million was spent reviewing unchanged returns. for periods of more than 200 hours.
Providing more disclosure of tax information by multinational companies could help reduce the reliance on offshore tax havens. âCorporate tax avoidance and the shifting of profits by highly profitable multinational corporations make the global tax system unfair to American small businesses and working people,â said Ian Gary, executive director of the Financial Accountability and Corporate Transparency Coalition, in a press release. âOur coalition strongly supports the Tax Haven Disclosure and Offshoring Law, as it provides much needed insight into corporate profit shifting and tax avoidance strategies, both to protect investors and inform policymakers. and the public.