The U.S. Department of Treasury released new rules today aimed at reducing tax avoidance. By requiring multinational companies to record profits and taxes paid on a country by country basis, the IRS will, for the first time, have the information necessary to crack down on those that manipulate international tax laws to gain a competitive advantage.
Country-by-country reporting (CBCR) of taxes paid in all jurisdictions will increase transparency, hold corporations accountable to meet their tax responsibility and lighten the load for small business owners and their customers.
Multinational corporations have notoriously gamed the system with elaborate schemes and tax strategies that leave small business owners and everyday taxpayers footing their bill. These highly profitable, international companies shift profits to low-tax jurisdictions, known as “tax havens,” where they pay little to no corporate taxes.
Top economists estimate that tax avoidance will have cost the US government over $100 billion in lost tax revenue by the end of 2016, but the cost is not borne by the government alone. In addition to the blow dealt to communities in the resulting budget cuts and lost services, small business owners and ordinary taxpayers are called on to pick up the slack and pay a larger percentage.
For too long, small business owners on Main Street have faced an unfair playing field against multinational competitors. This rule is an important first step to curb sophisticated tax avoidance strategies and restore wealth to the communities and the small business owners that drive local economic growth.
“We know that large, multinational corporations use intricate webs of offshore tax shelters to game the system, and their practices are leaving small business owners to shoulder the load,” says Amanda Ballantyne, National Director of the Main Street Alliance. “These new rules allow the IRS to follow the money, break the webs, and tell tax dodgers the game is over."