Bill seeks to spotlight corporate profit shifting globally
Listed companies with overseas operations would be required to disclose their country-by-country financial reports, outlining how they leverage foreign tax credits to reduce their tax liability, under a law introduced this week to the House and Senate.
The “Tax Havens Disclosure and Offshoring Act,” introduced by Chris Van Hollen (D-Md.), In the Senate and Cindy Axne (D-Iowa), in the House, would require companies to identify their foreign affiliates and to be provided: country by country, information on their profits, taxes, employees and tangible assets.
Businesses don’t have to disclose this information now, and rather than providing country-specific information about their taxes, they can use a blended all-in rate.
Critics find the current disclosure requirements too lenient and say they are encouraging companies to move their operations overseas to cut taxes.
“Some of the biggest American companies are using accounting gimmicks to pretend their profits are made in offshore tax havens and thus avoid paying their fair share of taxes in the United States,” said Amy Hanauer, executive director of the Institute on Taxation and Economic Policy. in a report. “This legislation takes a very reasonable step in letting lawmakers and the public know what these companies are doing.”
Businesses already disclose much of the information sought by law in their income tax returns, but the IRS does not make this information public.
In a summary provided by Van Hollen, the legislation would allow information to be made public separately from the IRS, which would help give the public a picture of how international tax laws work and where businesses locate their business. Commercial activities.
“Americans have a right to know when companies are using incentives in our tax system to send jobs overseas or abuse offshore tax havens,” Van Hollen said. “This legislation will highlight the games that big companies play to move their profits overseas and avoid paying taxes to support public investment here at home.”
The bill is intended to work seamlessly with the tax changes sought by the Biden administration. Among other things, the Biden plan includes an increase in the global low-tax intangible income tax (GILTI) and the elimination of the tax rate on foreign-derived intangible income (FDI).
The aim of the two tax changes is to reduce incentives for companies to shift their activities and profits to low-tax countries by creating a country-by-country minimum tax.
It also matches the administration’s support for a global minimum tax, to end what critics call a race to the bottom as countries use low tax rates to compete for multinational operations.
So far, the House and Senate bills, which were introduced in the last Congress but were not passed, have not garnered bipartisan support.