House Lawmakers to Vote this Week on Temporary Renewal of “Tax Extenders” Package – including Two Outrageous Offshore Tax Loopholes Costing Taxpayers $10 Billion Annually
Members of Congress should reject two egregious international tax loopholes in pending legislation, which combined would cost American taxpayers $10 billion per year, the Financial Accountability and Corporate Transparency (FACT) Coalition, its members, and tens of thousands of Americans said today.
U.S. House lawmakers are likely to vote this week on a proposal to temporarily renew a package of expired tax cuts for two years, known as the “tax extenders.” Among the largest of those provisions are two offshore tax loopholes—namely the “CFC Look-Through Rule” and the “Active Financing Exception”—which reward multinational corporations for artificially shifting profits overseas to dodge taxes at the expense of the American public.
“It’s high time Congress takes a stand against multinational corporations that shift their profits offshore to avoid paying their fair share of taxes,” said Clark Gascoigne, acting director of the FACT Coalition, which unites over 100 leading small business and faith-based, human rights, investor, anti-corruption, public-interest, government watchdog, labor and global development organizations from across the idealogical spectrum. “When Congress incentivizes multinational corporations to continue avoiding paying taxes by manipulating their tax bills, small businesses and average American taxpayers have to pick up the tab in the form of cuts to public programs, higher taxes and bigger government deficits.”
Strong Opposition to Permanent Extension
While a temporary extension is on the docket for Thursday, many members of Congress are continuing to push for a larger tax deal that would enshrine these two offshore loopholes permanently in the tax code at a staggering cost of $100 billion over ten years.
“Naturally, we urge all members of Congress to support the interests of the American people, oppose the loopholes that reward offshore tax haven abuse, and reject any attempt to reopen or cement them permanently into our already loophole-ridden tax code,” added Gascoigne.
Over 89,000 Americans Call on Congress to Reject Offshore Provisions
Opposition to these offshore loopholes was echoed by tens of thousands of Americans across the country who wrote more than 89,000 letters to their members of Congress this week urging them to oppose any effort to either extend or make permanent the CFC Look-Through Rule and Active Financing Exception.
“Congress needs to drop corporate tax loopholes from their holiday shopping list,” said Nathan Proctor, national campaign director with Fair Share, a FACT Coalition member who helped mobilize citizens on this issue. “Congress should end each and every loophole that allows a set of larger companies to play a rigged game. They have a chance right now to leave these two offshore loopholes behind, and make sure everyone plays by the same rules.”
“When corporations dodge their taxes, the public ends up paying,” said Ana Owens, tax and budget advocate with the U.S. Public Interest Research Group (PIRG), another FACT Coalition member. “The American multinationals that take advantage of tax havens use our roads, benefit from our education system and large consumer market, and enjoy the security we have here, but are ultimately taking a free ride at the expense of other taxpayers. American citizens understand this; that’s why tens of thousands of them are standing up and saying ‘enough is enough.’”
Bigger Deal to Phase Out Offshore Loopholes?
While negotiations in Congress continue to work toward a bigger tax deal, it appears that some people on Capitol Hill may be noticing the outcry from the American public. Media reports suggest that some policymakers now may be considering phasing out these two offshore loopholes over five years, instead of making them permanent. While FACT, its members, and taxpayers certainly would prefer this approach over any permanent extension, the cost of such a move still could be close to $50 billion over five years for just the offshore provisions—encouraging more companies to shift their profits offshore.
“We are happy to see that negotiators are considering phasing out these two egregious tax giveaways to multinationals, but an even better approach would be to drop them from any package completely,” said Susan Harley, deputy director of Public Citizen’s Congress Watch division, another member of the FACT Coalition that engaged citizen activists to oppose the loopholes. “America is being bled of billions in revenue every year because multinational corporations are gaming tax giveaways. These loopholes should be closed once and for all; otherwise the U.S. is leaving the door wide open to tax avoidance by companies that can and should be paying their fair share.”
“Our economic progress is undermined when the tax code rewards financial manipulation rather than innovation and productive investment,” said David Levine, CEO and co-founder of the American Sustainable Business Council. “National polling of small business owners found that 91 percent think U.S. multinational corporations’ use of accounting loopholes to shift profits to offshore subsidiaries to avoid taxes is a problem.”
“Every time a big corporation uses accounting schemes to avoid paying its full measure of taxes—the typical use of tax havens—small businesses and working families pay the price, either in higher taxes or deteriorating public services,” said Kelly Conklin, executive committee member of Main Street Alliance and co-owner of Foley-Waite LLC, of Kenilworth, New Jersey.
“Loopholes shouldn’t be the status quo. We must ensure that our tax system is fair, transparent and benefits all of us,” said Eric LeCompte, executive director of Jubilee USA Network, a religious development coalition.