November 20, 2020

“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 the laundering of money through the financial system.

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State of Play

Corporate Ownership Transparency

More than a decade after FACT Coalition member organizations began working to end anonymous companies, Congress is nearing the finish line to finally pass a bill that could do just that. Thanks to the extensive efforts of this Coalition and its partners, the Corporate Transparency Act was included in the House version of the annual defense authorization bill over the summer. This December, the House and Senate have a critical opportunity to enact this legislation as part of the must-pass National Defense Authorization Act for Fiscal Year 2021. The Coalition continues to organize to get this reform through Congress and onto the President’s desk.

Recent exposés, including the FinCEN files by the International Consortium of Investigative Journalists (ICIJ) and reports of fraud surrounding Covid-19 relief, underscore the urgency to enact key financial reforms. Based on Suspicious Activity Reports (SARs), the FinCEN Files investigation exposes money laundering and corruption facilitated by top global banks, and questions the ability of current regulatory frameworks to stop these illicit transactions.

Supported by a diverse coalition, the NDAA amendment would require companies to disclose their true owners to prevent anonymous companies from forming and being used for illicit activity. Several prominent officials have drafted op-eds in the last few weeks calling for passage of this legislation—including a Sheriff in Oklahoma, a former Republican State Rep. in NC, and the sponsor of the CTA, Congresswoman Carolyn Maloney.

Commenting on the FinCEN Files and the NDAA amendment, FACT’s Clark Gascoigne said:

“I don’t want to understate how important that bill is being negotiated as part of the defense bill would be from the beneficial ownership side, but also on the money laundering side, allowing the banks and FinCEN to use more machine learning and technology and analyze trends. If Congress could do one thing right now, it is to get this bill across the finish line.”

The National Defense Authorization Act is expected to be enacted in December 2020.

Tax

The election of Vice President Joe Biden – who made domestic and international tax reform part of his campaign platform – has opened new doors for tax justice advocates to advance key regulatory changes. The fate of legislative reforms rests, in part, on the results of January 5th Senate runoffs in Georgia. At a recent online briefing, the FACT coalition discussed what some of these reforms could look like and the opportunities that the next few years could provide. While Senate dynamics are unclear, a Biden Administration could impact tax avoidance by multinationals. A recent court decision to uphold fines for Coca-Cola shows that strong IRS enforcement of existing laws could be one way to help reign in these schemes. The Coalition included these and other recommendations in a memo to the Biden-Harris Transition Team.

Tax Transparency

To rebuild from the current economic crises and raise revenue streams, tax transparency is needed now more than ever. Experts gathered in two virtual congressional briefings to discuss ways to remedy corporate tax avoidance. Representatives from investment firms, credit rating agencies, labor unions, small business trade associations, and advocacy groups all advocated for country-by-country reporting of key financial information. The Disclosure of Tax Havens and Offshoring Act (H.R.5933, S.1609) would require companies registered with the SEC to carry out public country-by-country reporting.

FACT will host a panel at the International Anti-Corruption Conference on December 1st. The panel, titled “Trending Toward Transparency: The First Global Standard on Corporate Tax Disclosures,” will discuss the newTax Standard from the Global Reporting Initiative with a series of stakeholders.

Following up on previous support from trade associates, there is now support from a majority of small business owners for multinational tax transparency. Three quarters of small business owners want corporations to publicly disclose their taxes, and believe it is a major problem when they do not. A similar study suggests there is public support for policymakers to tackle tax havens. The issue is also supported by academics and former government officials, who say requiring corporate transparency leads to greater accountability and a fairer tax system. Supporters from a broad array of sectors hope to move forward many pieces of legislation introduced in Congress.