Video: Introduction of the Corporate Tax Fairness Act

Late last week, Senator Bernie Sanders (I-Vermont) introduced the Corporate Tax Fairness Act. Right now, corporations based in the United States are allowed to defer taxes on any overseas earnings indefinitely. In practice, this leads to two things: tremendous amounts of profit shifting via abusive transfer pricing to tax havens, and large deposits of untaxed cash sitting in bank accounts located in those same tax havens. If enacted, this law would end deferral, requiring that all U.S. corporate profit would be taxed for the year that it was earned.

Below, Senator Sanders speaks on the bill:

On top of collecting an estimated $600 billion in tax revenue over 10 years for the United States from the world’s biggest multinational corporations, this bill would create a huge windfall for developing countries. Under the status quo, U.S. multinationals have an incentive to use abusive transfer pricing to shift profits away from developing countries, where they often earn billions of dollars. The U.S. would immediately tax this profit at 35%, but offers a 1:1 tax credit for any U.S. multinationals who pay tax in other countries. The U.S. companies don’t care whether or not they pay taxes to Uncle Sam in the United States or to local authorities in Nigeria or India or Argentina, so they do not invest resources in shifting profit away from these countries. Acme Multinational Inc. might end up paying something like 15% tax in India and 20% in the United States, bringing in lots of revenue for both countries.