April 20, 2023

"Just the FACTs" is a round-up of news stories and information regarding efforts to combat corrupt financial practices, including offshore tax haven abuses, corporate secrecy, and money laundering through the financial system.

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Here's the State of Play:
Australia Introduces Tax Transparency Legislation with Potential to Impact Major U.S. Firms

On April 6, the Australian federal government introduced draft legislation to mandate public country-by-country reporting (PCbCR) of key tax and operational data from large multinationals registered in the country. The legislation - if passed into law, as is currently expected - has the potential to introduce reporting requirements for a number of large U.S.-headquartered corporations doing business in Australia.

While pressure has mounted in recent years on individual firms and industries - notably the extractives industry - to adopt more transparent tax policies, the new Australian legislation represents the first comprehensive PCbCR regime with global reach to be introduced by any major jurisdiction.

The draft legislation is primarily based upon standards set by the Global Reporting Initiative (GRI), and in some instances even expands upon the GRI 207 standards on country-by-country reporting. Notably, the legislation would require affected entities to report their effective tax rates, expenses from related party transactions, and details of intangible assets for each country in which they are doing business. Per an exposure draft explanatory document released by the Australian Treasury, "The presence of related party transactions and increases in intangible assets are specific indicators of corporate governance risk and would complement the GRI 207 disclosures."

With Australia's PCbCR regime expected to enter into force later this year, FACT is again calling on the Securities and Exchange Commission to exercise its existing authority to mandate PCbCR for large multinational filers.

FACT, Allies Submit Amicus Brief in Court Case Challenging Landmark Transparency Law

The FACT Coalition, Transparency International U.S., and the small business organization Main Street Alliance filed an amicus brief last week in the case of National Small Business United (NSBU) v. Janet Yellen, an ongoing constitutional challenge to the landmark Corporate Transparency Act (CTA).

The brief, the submission of which was authorized by the court despite the objection of the NSBU, defends the CTA as a "historic step that Congress correctly understood would strengthen--rather than weaken--law enforcement's ability to curtail the use of anonymous companies to commit crimes," through a combination of reporting requirements that "are neither unusual, nor unprecedented."

The CTA - which requires Treasury to collect information on the true, "beneficial" owners of certain U.S. companies and other entities - represents one of the most significant legislative anti-money laundering and financial transparency achievements in a generation. For decades, anonymous entities have provided shady actors with cover to launder ill-gotten gains through the U.S. financial system, undermining both the rule of law and U.S. national security. Reporting requirements introduced under the CTA both are relatively unburdensome for legitimate small businesses, and are critical to ending the era of financial opacity that has enabled transnational crime, sanctions evasion, and domestic tax dodging.

Latest from FACT

Press Release: FACT Applauds Australia's Introduction of Groundbreaking Tax Transparency Legislation with Global Reach

The FACT Coalition welcomed the introduction of draft legislation in Australia to mandate PCbCR from large multinational entities. Per FACT executive director Ian Gary: "The introduction of this legislation in Australia is a game-changer in the fight for a fairer, more transparent international tax system. Understanding where multinational corporations are doing business and paying - or not paying - taxes is a vital step towards ending the era of corporate tax avoidance that has robbed governments worldwide of much-needed revenues and exacerbated global inequality."

FACT in the News

Quoted In: Companies pressed to reveal more about the taxes they pay

FACT executive director Ian Gary outlined the investor case for PCbCR in the Financial Times' coverage of recent shareholder proposals calling for greater tax transparency from some of the largest U.S.-based multinationals.

"Investors need to know how close to the line corporate tax strategies are, so they can assess how much risk they are willing to take," said Gary.

Quoted In: U.S. Treasury faces a wave of criticism over faltering push to unmask anonymous companies and track dirty money

FACT government affairs director Erica Hanichak was quoted in coverage by the ICIJ of recent commitments made by the Biden Administration in concert with 20 other nations on beneficial ownership transparency.

Hanichak noted that the commitment to effective verification of collected beneficial ownership information was particularly important, saying that "(the commitment) is a huge step forward - it showed promise."

Quoted In: Australia Unveils Public Country-By-Country Reporting Rules

Ian Gary was quoted through FACT's press release on Australia's draft PCbCR legislation in coverage by Kevin Pinner of Law 360.

"The introduction of this legislation in Australia is a game-changer in the fight for a fairer, more transparent international tax system," said Gary.

Recent and Upcoming Events

Watch: Vessel Ownership Risks - Global Financial Integrity

Watch a full recording of Global Financial Integrity's April 13 event on money laundering risks arising from insufficient beneficial ownership transparency in the international shipping industry. An upcoming white paper co-authored by the Institute of International Banking Law & Practice, Global Financial Integrity, and S&P Global expanding on the subject of beneficial ownership transparency in international shipping is expected in the coming months.

About the FACT Coalition

The Financial Accountability and Corporate Transparency (FACT) Coalition is a non-partisan coalition of more than 100 state, national, and international organizations working toward a fair and honest tax system that addresses the challenges of a global economy and promotes policies to combat the harmful impacts of corrupt financial practices.

For more information, visit www.thefactcoalition.org

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