August 9, 2022



"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.



Send feedback or items for future newsletters to Patricia Ainembabazi at [email protected].



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Here's the State of Play:

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Revenue Raisers in Inflation Reduction Act Better Position U.S. for Ending Tax Dodging by Multinational Enterprises, But There is Much Left to Accomplish




On August 8, the FACT Coalition applauded [ [link removed] ] the inclusion of crucial investments in the Internal Revenue Service (IRS), and specific measures to combat tax dodging by multinational corporations in the Inflation Reduction Act of 2022, which the Senate enacted over the weekend. Now, FACT is urging the House to adopt this bill so that Congress can permanently stop incentives for large multinational corporations to avoid taxes by shifting profits abroad and weakening the U.S. tax base at the expense of the American working people and worldwide democracy.

The Inflation Reduction Act allocates $80 billion in additional funding to the IRS over the next decade, imposes a 1 percent stock buyback excise tax on publicly traded corporations, and establishes a 15 percent worldwide corporate alternative minimum tax (CAMT) on the financial income of the largest multinationals. Each of these improvements is anticipated to generate large swaths of income and deter multinational corporations' tax avoidance strategies.


Nonetheless, the Inflation Reduction Act omitted critical international tax changes previously passed by the U.S. House of Representatives in the Build Back Better Act [ [link removed] ], as well as those put forward in President Biden's 2023 proposed budget [ [link removed] ], that would have advanced the Organization for Economic Cooperation and Development (OECD's) two-pillar framework [ [link removed] ] to address base erosion and profit shifting. Agreed to by 137 jurisdictions last October, including the United States, the two-pillar framework would create a global minimum 15% effective corporate tax applied country-by-country basis and reallocate certain taxing rights for the largest multinationals. While CAMT may be a subtle step towards the two-pillar framework, it is not a sufficient substitute for technical or geopolitical reasons, and the United States would be making a policy blunder [ [link removed] ] in failing to further the agreement. FACT urges Congress [ [link removed] ], as well as Treasury and OECD members, to remain committed to enacting and improving the OECD two-pillar framework on global corporate taxation.


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Public Country-by-Country Reporting of Key Financial Data Helps Investors Understand Geopolitical and other Material Risks, Report Finds


On July 28, the FACT Coalition launched a report, "A Material Concern: The Investor Case for Public Country-by-Country Reporting [ [link removed] ]," calling on the Securities and Exchange Commission (SEC) to use its regulatory authority to require large U.S. multinational corporations to disclose data they already collect regarding their physical presence and tax obligations and payments in each country in which they operate.



This information would provide investors with much-needed insight into the tax, geopolitical and other risks they face in owning multinational companies.


In recent months, shareholders have filed resolutions [ [link removed] ] urging tech giants such as Amazon, Microsoft, and Cisco Systems to implement PCbCR reporting following Global Reporting Initiative (GRI) standards. [ [link removed] ] Investors managing $3.6 trillion in assets wrote to the SEC in support of the Amazon shareholder filing, which – with SEC backing overruling Amazon's opposition – came up for a vote at Amazon's annual meeting on May 25, 2022. The vote drew support from independent investors representing 21 percent of Amazon's outstanding shares in favor of greater transparency. FACT recommends [ [link removed] ] that the SEC use its current authority to promulgate a rule mandating PCbCR within a year.


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Senate Falls Short on Funds Needed to Hunt Oligarch Assets, Combat Kleptocracy, and Fight Financial Crime




On July 28, the Senate Appropriations Committee released [ [link removed] ] its draft appropriations bills for the fiscal year 2023 providing just $189 million to the Financial Crimes Enforcement Network (FinCEN). FinCEN is the bureau of the Treasury Department that serves as the nation's financial intelligence unit, anti-money laundering standard setter, and central institution responsible for implementing many of the domestic reforms included in the Administration's inaugural U.S. Strategy on Countering Corruption [ [link removed] ].

Chief among the reforms tasked to FinCEN is implementing the Corporate Transparency Act (CTA) to end the abuse of anonymous U.S. shell companies. FinCEN is behind in implementing the CTA, and has cited perpetual underfunding as a principal reason for the delay. FinCEN is also responsible for drafting rules to counter money laundering in the $50 trillion real estate and $11 trillion private investment markets.


While an increase above FY2022 enacted levels, the Senate figure falls short of the funding approved [ [link removed] ] on July 20 by the House and requested [ [link removed] ] by the President by a sum of $21 million–or a full 10 percent. Notably, the Senate package would fully fund the Office of Terrorism and Financial Intelligence, which oversees the U.S. sanctions office, at the $212-million level requested by the President. In the fight against corruption and for global democracy, the United States can ill afford to undercut its own efforts by continually underfunding FinCEN, and the Senate must increase the funding it will allocate to the agency.


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Latest From FACT




COMMENT LETTER: FACT Submits Comments on FATF Recommendation 25 to Prevent Misuse of Trusts and Other Legal Arrangements [ [link removed] ]

August 1: FACT endorses FATF Recommendation 24's improvements to corporate, LLC, and other entity disclosures. Relatedly, we see heightened transparency requirements in Recommendation 25 as crucial to curbing secrecy in other nodes of financial networks, including trusts and other legal arrangements.



PODCAST: States Eye Reforms Aimed at Shell Corporation Secrecy [ [link removed] ]

July 29: Ryan Gurule, Policy Director at FACT Coalition, argues that states play a crucial role in preventing illicit financial flows that facilitate tax evasion and money laundering.


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FACT in the News

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QUOTED IN: SEC should require global tax disclosure: transparency group [ [link removed] ]

August 4: CFO Quotes Ian Gary, FACT Coalition -"Due to inadequate [SEC] disclosure rules in the U.S., investors have very little information regarding the material tax and geopolitical risks they face, making it more difficult to navigate complex investment decisions and to be truly in the know."



QUOTED IN: SEC Should Require Public Tax Reporting by U.S. Multinationals, Advocacy Group Says [ [link removed] ]

August 4: Thomas Reuters Quotes "Investors face an "information gap" when assessing shifting risks and financial conditions at many U.S. multinationals"- FACT report reveals.



QUOTED IN: Investors Need Better SEC Tax Transparency Rules, Report Says [ [link removed] ] [ [link removed]? ]

July 28: LAW360 Quotes FACT report asks the SEC to force companies to publicly disclose data on taxes, related-party revenues, and the number of workers in each country because the information is a material risk.


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Recent and Upcoming Events




July 28: Watch the video of the FACT Coalition launch of our latest report, "A Material Concern: The Investor Case for Public Country-by-Country Reporting," [ [link removed] ]calling on the SEC to require large U.S. multinational corporations to disclose data they already collect about their tax obligations and payments in each country in which they operate. The launch event featured Senator Chris Van Hollen, Emma Roberts from mining giant BHP, and Katie Hepworth of PIRC, an investment advisory firm.



On August 15, The ACAMS US Capital Chapter will host a second lecture series on corruption. [ [link removed] ] The session will focus on the role of investigative journalists and nongovernmental organizations in the battle against corruption in countries such as Equatorial Guinea, Yemen, Venezuela, South Sudan, and Syria. Register to attend [ [link removed] ].


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Social Media Shoutouts

@RepMalinowski [ [link removed] ]: Tom's ENABLERS Act includes the strongest protections in 20 years against crooks and terrorists laundering money in the U.S. It was originally introduced after the leak of the Pandora Papers.

@SenWarren: [ [link removed] ] Let's pass the Inflation Reduction Act so the IRS can:

▪️crack down on tax cheating by the top 1%.

▪️provide better services to the 99% of hardworking Americans just trying to honestly file their taxes.

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@RepKatiePorter [ [link removed] ]: Corporate lobbyists fought to defund the IRS so it would be easier for corporations to evade taxes. Giving the IRS more resources is about big corporations finally paying their fair share-and stopping everyday Americans from having to pick up the slack.

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@SenatorCarper: [ [link removed] ] Three former, bipartisan IRS commissioners agree: the Inflation Reduction Act will get to the heart of the problem. This historic legislation will make it easier for everyday Americans to pay their taxes and ensure wealthy corporations pay what they owe.
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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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