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The International Monetary Fund (IMF) released a staff paper noting that corporate tax avoidance negatively impacts all economies, but hurts developing countries the most. The IMF’s release comes as the G20, the Organization for Economic Cooperation and Development and United Nations bodies seek vehicles to diminish corporate tax avoidance.
“The developing world loses more in corporate tax avoidance than it receives in aid from developed countries,” stated Eric LeCompte, Executive Director of the religious anti-poverty group, Jubilee USA Network. “The paper shows that when multinational corporations shift their profits to another country to pay less taxes, we see higher levels of global inequality.”
The IMF paper is entitled “Spillovers in International Corporate Taxation.” “Spillovers” are the impact of one country’s policies on another country. By shifting profits to countries with low tax-rates (often so-called “tax havens”), corporations avoid paying their taxes in the countries where they make those profits. The paper notes that this is a particularly large problem in developing countries, which need corporate taxation to fund social services. The paper argues that “many developing countries…need to be better protected against the avoidance of tax on capital gains on natural resources.”
“These ‘spillovers’ are more like a flood,” noted LeCompte. “For every $1 poor countries are receiving in official aid, nearly $10 is leaving through corruption and tax avoidance.”
Thanks to Jubilee USA for this information.
OIP joins Domini and other Shareholders in urging Google to pay its fair share of taxes May 11th, 2014
A group of Google shareholders, headed up by Domini Social Investments, may soon find out. The group has filed a proposal for consideration at the shareholder annual meeting asking the company to adopt a set of principles regarding taxes. The shareholders are recommending that the principles include consideration of any “misalignment between tax strategies and Google’s stated objectives and policies regarding social and environmental sustainability.”
The proposal comes after several widely publicized stories about Google’s aggressive tax planning which moves billions of dollars annually to offshore tax havens. In 2012 alone, Google dodged an estimated $2 billion in income taxes by shifting an estimated $9.5 billion to offshore tax havens.
Faith-based and Socially Responsible Shareholders Call on Google to Pay Fair Share of Taxes April 8th, 2014
The Missionary Oblates co-filed with ethical investor Domini Social Equity fund, in a shareholder resolution calling on the multinational firm Google to pay its fair share of US taxes. NEI Investments LP, Robert Burnett, and Investor Voice, SPC joined as co-filers. Google recommended a vote against the shareholder proposal, which argues that “Google’s tax practices have come under scrutiny in the United Kingdom and France, leading to regulatory pressures and reputational damage.” The shareholder proposal cited as one of its arguments for the proposal, a Bloomberg article headed “Google cuts billions off its tax bill each year by sending profits through Ireland to a mailbox in Bermuda.”
The proposal stated, “Although most Google engineers are US-based, where much of product development takes place, Google’s intellectual property is held in Bermuda, which does not levy corporate taxes.” It went on to state: ‘Tax haven’ jurisdictions are characterized by low tax rates, financial secrecy and light regulation. Tax havens facilitate financial opacity and illegal activities including tax evasion and money laundering.”
The proposal has received coverage in The Sunday Times in London and the Independent.ie an Irish news source. Although it is not expected to pass, the proposal will once again attract attention to Google’s low tax outlay against multibillion revenues.
FACT Coalition Calls on Congress to Eliminate Corporate Tax Loopholes January 21st, 2014
The Missionary Oblates recently joined other organizations working through the Financial Accountability and Corporate Transparency (FACT) Coalition in asking Congress to eliminate corporate tax loopholes. The coalition is concerned about corporations shifting jobs overseas, and corporate avoidance of US taxes. The letter calls on Congress to “refuse to extend two recently expired tax breaks that subsidize highly profitable corporations at the expense of ordinary Americans.”
These tax breaks perversely encourage “American corporations to lend, invest and create jobs in foreign countries rather than in the U.S.” The ‘active financing exception’ called out in the letter is one of the primary reasons General Electric has paid, on average, only a 1.8% effective U.S. federal income tax rate over the past ten years. This exception was removed in the tax reform of 1986, but reinstated after fierce corporate lobbying. It has been extended consistently since 1998. “The last two-year extension of the active financing exception was estimated by the Joint Committee on Taxation to have cost taxpayers $11.2 billion.”
A second exception, called the CFC-look through rule, was also targeted in the letter. The groups signing the letter said, “The last two-year extension of the CFC look-through rule was estimated by the Joint Committee on Taxation to have cost taxpayers $1.5 billion.”
As people continue to struggle to find decent work, the outrage over multinational corporations essentially gaming the system is understandable. We hope this outrage will compel Congress to stand up for ordinary taxpayers and stop giving these corporations a free pass.
The Oblate JPIC Office joined others in the FACT Coalition in signing a letter sent this morning to Chair of the Senate Finance Committee, Max Baucus, on proposed international tax reform. The group said a proposal before the Committee “rightly identifies the need to stop corporations from shifting profits to offshore tax havens to avoid taxes. Unfortunately, the proposal falls short in three critical ways and leaves room for the offshoring of jobs and profits to continue:”
1. “It does not sufficiently end incentives for multinational corporations to shift profits offshore, which costs taxpayers an estimated $90 billion per year and creates an uneven playing field for small and domestic businesses.”
2. “It is revenue neutral, earmarking all the revenue raised from closing loopholes for reductions in the corporate tax rate. With federal revenue from corporations hovering at multigenerational lows, precisely because of the offshore profit shifting incentives, this is unacceptable.”
3. “It should hold corporations accountable to report their profits and revenues in a consistent manner to government, shareholders and the public.”
In arguing for doing away with lucrative corporate tax loopholes, the reform-minded groups argue that “Corporations benefit from the operation of government just as individuals do (and more so in some cases due to myriad tax benefits and lucrative contracts) and should be expected to contribute to financing our democracy, public services and rule of law. However the corporate share of federal revenue was just eight percent in 2011, having declined by more than 60 percent in the last 50 years.”
“Due to huge loopholes and other factors, dozens of big corporations pay no federal income taxes, while reaping billions of dollars in profits. According to the Government Accountability Office, corporations pay just a 12.6 percent effective tax rate, far below the statutory rate of 35%.”
Close Expensive Offshore Tax Loopholes October 18th, 2013
Tax Justice Network is collecting organizational signatures for a letter in support of proposed legislation by Senator Carl Levin; the Stop Tax Haven Abuse Act (S. 1533). This critical piece of legislation closes the most egregious offshore tax loopholes used by big multinationals and wealthy individuals. It would raise $220 billion in revenue – enough to cover the costs of two years of the sequester.
Their goal is to sign on 500 organizations. Now that a short-term deal has been struck to reopen the government and extend the debt limit, Congress will move to set up a conference committee on the budget. Closing tax loopholes needs to be on the table in these budget negotiations.
The deadline for the letter is COB Friday, October 25th. To sign on, please visit this link.