Martin Michaels
“Over a three-year period, 30 [top] companies devoted more of their monies to lobbying this Congress than they did in paying taxes to the Treasury,” said Congressman Lloyd Doggett (D-Texas) in a Congressional hearing Monday. “Some have a negative tax rate. Many of our largest corporations are paying effective rates that are single digits.”
Doggett’s announcement follows a report by the Government Accountability Office (GAO) finding that corporate tax loopholes resulted in $181 billion in lost revenue for 2011, and billions more through 2013.
The report — “Corporate Tax Expenditures Information on Estimated Revenue Losses and Related Federal Spending Programs,” offers one of the clearest pictures of lost tax revenue on roughly $5 trillion in personal and corporate holdings abroad. Piecemeal Internal Revenue Service (IRS) investigations have recovered millions — $74 million in a January investigation alone — but are a small effort compared with the latest Congressional proposals.
The GAO, the investigative arm of Congress, released the study on tax day when millions of Americans file their returns, reporting, “Tax expenditures special exemptions and exclusions, credits, deductions, deferrals and preferential tax rates claimed by corporations, individuals, or both support federal policy goals but result in revenue forgone by the federal government.”
Additional research conducted by the GAO shows that individual tax revenue losses totaled $891 billion in 2011, and included tax expenditures used by other types of business entities that pass through to individual taxpayers.
The study, ordered by members of Congress, has resulted in a bevy of legislative proposals aimed at reforming the tax codes and bringing in lost revenue. Toward these ends, Congressman Lloyd Doggett (D-Texas) has taken the lead, unveiling the Stop Tax Haven Abuse Act proposals, currently backed by 45 co-sponsors.
The Stop Tax Haven Abuse Act was originally introduced by Congressman Carl Levin (D-Mich.) in 2011 but failed to receive the proper support necessary to become law.
The proposed legislation would require all U.S.-registered multinational corporations to provide annual income, reporting on a country-by-country basis.
Currently, cracking down on tax sheltering and fraud has been a task relegated to the Internal Revenue Service (IRS), capable of conducting occasional audits and investigations. Previous IRS investigations have recovered millions, but remain a fraction of what is recoverable.
One IRS investigation into Wegelin & Company, the oldest bank in Switzerland, led to the bank admitting in January that employees helped wealthy Americans shelter more than $1.2 billion — one of the single largest known cases of tax fraud in U.S. history.
As part of a plea deal, representatives from the Swiss bank agreed to pay $74 million in fines. Because the instances of tax fraud are so numerous, the IRS has relied increasingly upon a whistleblower program, encouraging bank employees to speak out against unscrupulous policies.
International effort
Because most tax shelters are outside U.S. borders, cracking down on tax shelters remains an international issue, requiring action not just by the U.S., but by a host of other countries. Last week, five members of the European Union – France, Germany, Italy, Spain and the United Kingdom – agreed to the world’s first multilateral system of tax information exchange, based on similar bilateral U.S. requirements passed three years ago.
Over the weekend, five additional countries – Belgium, the Czech Republic, the Netherlands, Poland and Romania – signed on to the pilot project to examine possible reforms, which is open to all members of the European Union (EU).
“There’s a flurry of action going on right now, both domestically and internationally, but this EU announcement is huge,” Clark Gascoigne, communications director for Global Financial Integrity, a Washington watchdog group, told IPS.