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Federal Tax

Democratic Bill Would Provide Transparency in Corporate Use of Tax Havens

Jeff Carlson  

· 5 minute read

Jeff Carlson  

· 5 minute read

A group of 11 Democratic Senators are backing legislation to provide transparency around corporations’ use of tax havens and incentives to offshore jobs which supporters say sends a strong signal ahead of the Financial Accounting Standards Board’s (FASB) anticipated rulemaking on this issue.

The Disclosure of Tax Havens and Offshoring Act introduced March 2 by Senator Chris Van Hollen, Democrat of Maryland, would require public companies to disclose their financial reporting on a country-by-country basis. Supporters of the bill say that ensuring public access to such information would provide investors the tools they need to understand the tax structures and risks of the businesses in which they invest.

Under current law, a U.S. corporation may use foreign tax credits to reduce U.S. tax liability on foreign profits based on amounts the company paid in taxes on those profits. According to Van Hollen’s office, the Tax Cuts and Jobs Act (TCJA) (PL 115-97) 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.

“For too long, big corporations have taken advantage of the U.S. tax code to hide their profits and ship their jobs overseas,” said Van Hollen. “This bill will provide vital transparency to both the American public and investors as to how these corporations abuse our broken tax system and the risks, they are taking in the use of offshore tax havens.”

The measure would ensure there is more transparency in such tax practices by requiring large corporations to disclose basic information on each of their subsidiaries, and country-by-country financial information that sums together all their subsidiaries in each country – including profits, taxes, employees, and tangible assets.

Van Hollen notes that this information is already reported to the IRS under an international OECD framework, but his bill would ensure public disclosure to provide data on how international tax laws are working and where corporations are locating their business activities and taxes. Thus, when a corporation sends jobs overseas, their country-by-country financial report would show the extent to which the U.S. tax system is rewarding their behavior.

Democratic co-sponsors of bill include Senators Dick Durbin of Illinois, Bernie Sanders of Vermont, Tina Smith of Minnesota, Sheldon Whitehouse of Rhode Island, Amy Klobuchar of Minnesota, Robert Casey of Pennsylvania, Richard Blumenthal of Connecticut, Tammy Baldwin of Wisconsin, Tammy Duckworth of Illinois, and Elizabeth Warren of Massachusetts.


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