August 24, 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].
Here’s the State of Play:
Congress Finally Stands up to Tax Dodgers, but International Tax Loopholes Persist
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On August 16, President Biden signed the Inflation Reduction Act (IRA) into law. The IRA, among other things, creates a corporate alternative minimum tax (CAMT). The CAMT applies a 15 percent minimum tax on the largest corporations worldwide, aggregate “book” income, adjusted for certain identified tax preferences. Notably, the CAMT has several key differences when compared to the global minimum corporate tax that would be created by Pillar 2 of the OECD’s two-pillar solution agreed to by 137 jurisdictions last October.
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For example, the CAMT does not apply country-by-country, thereby increasing the incentive to offshore investment and shift profits away from the United States, and will apply to far fewer companies.
The FACT Coalition will continue to fight for international tax reforms left out of the Inflation Reduction Act that would more definitively remove the incentive for large multinationals to shift profits offshore or erode the U.S. tax base. While this alone will not advance international tax reforms to a desirable standard; FACT advocates for a framework that will a) permanently end tax dodging through profit shifting and base-erosion practices by multinationals, b) create a more stable tax policy for businesses and a level playing field regardless of the location of headquarters, operations, or profits being booked,decreasing the incentive to engage in tax competition by global governments, and c) advance multilateral global solutions to the world’s most pressing challenges, including threats to global democracy and climate change, including furthering the OECD agreement and improving the OECD process to incorporate concerns of developing nations better.
Furthermore, the IRA will also provide $80 billion in additional funding to the Internal Revenue Service (IRS) over the next decade to facilitate their operations, a remarkable step forward.
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Momentum Builds to Bring Anti-Money Laundering Obligations to Professional Gatekeepers
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The bipartisan ENABLERS Act, originally introduced in October 2021 in response to the Pandora Papers, is finally back on the frontline, paving a way to hold financial service providers responsible for knowing with whom they are working. As Scott Greytak, of FACT member Transparency International-US, told Reuters last week, “This is the most consequential anti-money laundering and anti-corruption law passed since 9/11, and it meets the immediate moment of being able to track, detect, and prevent dirty money from flowing into the country.”
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In this podcast, FACT’s Erica Hanichak and Scott Greytak of Transparency International-US delve into this comprehensive reform measure intended to reduce money laundering through professional U.S. gatekeepers. Additionally, the Coalition signed a letter of 23 organizations to the Senate supporting the bill, highlighting its great importance in shaping financial transparency and accountability while curbing corruption and illicit financial flows.
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FACT in the News
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Analysis: Stakeholders Push FATF for Centralized Beneficial Ownership Trust Registers
August 22: The FACT Coalition’s submission to the Financial Action Task Force (FATF) was featured in a recent Tax Notes analysis of suggested changes on the FATF’s Recommendation 25, governing beneficial ownership disclosures for trusts and other legal arrangements. FACT was one of several organizations, including Open Ownership and Transparency International, to recommend that FATF take a tougher stance in encouraging trust transparency when it considers the issue during its forthcoming meetings in October.
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PODCAST: States Eye Reforms Aimed at Shell Corporation Secrecy
August 14: The FACT Coalition’s Erica Hanichak and TI-US’s Scott Greytak join Michael Volkov on “Corruption, Crime, and Compliance” to delve into a deep analysis of the ENABLERS Act and its prospects in Congress. The pair also raises the need to adequately fund the Financial Crimes Enforcement Network (FinCEN) to bring U.S. anti-money laundering laws into the 21st century.
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Recent and Upcoming Events
Social Media Shoutouts
@DanRather: You know what scares unscrupulous rich people more than taxes? An emboldened IRS with enough resources to catch big-time tax cheats. All this fear-mongering is a smokescreen to protect those who refuse to pay their fair share.
@amyhanauer: If you don’t cheat on your taxes, then what the increased IRS funding means for you is: $200-$400 billion more for a better planet. And the IRS should have the staffing to answer your questions.
@iteptweets: "So just to be clear: the audits will be focused on wealthy tax cheats and corporate tax evaders, routine audits are done through the mail, the 87,000 new IRS staff are to be added over a decade..."
@SenWhitehouse: Here’s the same story via ProPublica. If this doesn’t wake us up to dark money, I don’t know what will. It makes Americans sick. We need to vote on DISCLOSE.
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.
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