US Senate News:
Source: United States Senator for Maryland Chris Van Hollen
June 16, 2021
Today, U.S. Senator Chris Van Hollen (D-Md.) applauded the House passage the Tax Havens and Offshoring Act, within the broader ESG Disclosure Simplification Act. This legislation, introduced by Senator Van Hollen and Rep. Cindy Axne (D-Iowa) will provide investors and the public with transparency on corporations’ 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 offshoring jobs.
“Americans have a right to know how our broken tax system is rewarding corporations that ship jobs overseas. As we work with President Biden to repair the damage of the 2017 Republican Tax Scam and grow jobs here at home through the American Jobs Plan, I’m glad to see the House pass our legislation to shine a light on the games big corporations play to move profits overseas and avoid paying taxes to support public investments here at home. Sunshine is the best disinfectant, and exposing these loopholes is critical to closing them. I’ll be working to get this passed in the Senate,” Senator Van Hollen said.
Under current law, a U.S. corporation may use foreign tax credits (FTC) to reduce U.S. tax liability on foreign profits based on amounts the company paid in taxes on those profits. While this makes sense on a per-country basis, as President Biden proposes in the American Jobs Plan, the 2017 tax law’s use of a blended or “global rate” for the minimum tax on foreign corporate profits provides a perverse incentive for companies to shift jobs and operations overseas in order to avoid the minimum tax on profits booked in tax havens.
The Disclosure of Tax Havens and Offshoring Act would ensure there is more transparency on this issue by:
- Requiring large corporations to disclose basic information on each of their subsidiaries, and country-by-country financial information that sums together all of their subsidiaries in each country – including profits, taxes, employees, and tangible assets.
- 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 are working and where corporations are locating their business activities and taxes.
A letter from investors with close to $2.9 trillion in assets under management that support this legislation can be found here. A letter from small business groups supporting this legislation can be found here. A letter from nonprofit organizations that support this legislation can be found here.
“Corporate tax avoidance and profit shifting by hugely profitable multinational companies 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 upon introduction. “Our coalition strongly supports The Disclosure of Tax Havens and Offshoring Act because it provides a much-needed spotlight on corporate profit shifting and tax avoidance strategies, both to protect investors and inform policymakers and the public.”
“Some of the biggest corporations in America use accounting gimmicks to pretend their profits are earned in offshore tax havens and thereby avoid paying their fair share of taxes to the U.S. This legislation takes a very reasonable step in allowing lawmakers and the public to know what these companies are up to,” said Amy Hanauer, executive director of the Institute on Taxation and Economic Policy (ITEP) upon introduction.
This legislation is cosponsored by Senators Amy Klobuchar (D-Minn.), Tammy Duckworth (D-Ill.), Sheldon Whitehouse (D-R.I.), Bernie Sanders (I-Vt.), Dick Durbin (D-Ill.), Richard Blumenthal (D-Ct.), and Tina Smith (D-Minn.).
The House version is cosponsored by Representatives 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).