July 15th, 2011
July 15th, 2011
The U.S. Federal government is in some dark times. Unable to find a political compromise to raise the debt ceiling, the U.S. faces a potential economic catastrophe. Negotiations are stalling. Tempers are flaring on both sides of the aisle. The key point of contention? Tax increases. President Obama has reportedly endorsed reducing the debt by $2 trillion with 83% of the reduction coming from spending cuts and 17% coming from new revenues. Those proposed new revenues (or “tax increases” as some have called them) would have come from closing tax loopholes for things like corporate jet ownership. But House Republicans rejected the proposal because they will only close loopholes in exchange for a lower marginal tax rate and reject the idea of using new revenues to balance the budget.
Fine. If Republicans refuse to close tax loopholes and raise revenue from those who are avoiding taxes legally, what about revenues from those who are avoiding taxes illegally? No new taxes. Not even ones that only apply to corporate jets. Let’s just make sure everyone is paying what they already owe.
That’s the gist of a new bill introduced by Senator Carl Levin (D-MI), the Stop Tax Haven Abuse Act. The bill contains an array of provisions that would ensure all Americans are paying what they owe (more on these provisions later) while raising an estimated $100 billion in new revenue annually. The bill is cosponsored by Senators Bill Nelson (D-FL), Bernie Sanders (D-VT), Jeanne Shaheen (D-NH), and Sheldon Whitehouse (D-RI). It has also been supported by a variety of pro-business and labor organizations, including: the American Sustainable Business Council, AFL-CIO, Business for Shared Prosperity and SEIU. Rep. Lloyd Doggett (D-TX) has introduced the House companion bills in the past and will likely do so again.
The bills provisions would effectively combat offshore and tax shelter abuses. The first, and perhaps most significant of the provisions would introduce country-by-country reporting by SEC-registered corporations related to their employees, sales, purchases, financing arrangements and taxes. It is a giant leap forward for an action item the Task Force on Financial Integrity and Economic Development has been adamantly advocated for years. This isn’t just good for tax revenue—it’s good for American business and anti-corruption and development efforts worldwide. As Raymond Baker, Director of Global Financial Integrity and a graduate of Harvard Business School, has noted:
The country-by-country reporting provision adds a layer of pro-investment, best practices accountability to this bill. For investors, the more information available about a company’s business practices and balance sheets, the better. This reporting requirement would also help anti-corruption and economic development efforts in developing countries by creating more transparency and accountability in the business dealings between multinational companies and governments.
In addition, the bill would authorize the Treasury Secretary to take special measures against foreign jurisdictions that impede U.S. tax enforcement, stop corporations that are primarily located in the U.S. from claiming foreign status and instead treat them as domestic, and close a variety of existing tax loopholes that allow credit default swaps from escaping taxation. The bill also strengthens penalties from those caught evading taxes.
As Baker says, “passage of the Stop Tax Haven Abuse Act would be a game changer.” Indeed it would be. Now let’s see who’s in.