Democrats Introduce Corporate Tax Transparency Bill in Congress
House Democrats have introduced legislation that would require multinational corporations to disclose more information about the taxes they pay in other countries.
The bill, known as the Corporate Transparency and Accountability Act, aims to shine more light on corporate tax avoidance strategies, requiring the disclosure of country-by-country and pre-tax profit information about companies’ taxes to provide more transparency for investors and the public.
The bill would require all public companies to include country-by-country financial information in their filings with the Securities and Exchange Commission. The information would mirror the data collected by the Internal Revenue Service about large multinational companies under a rule recently introduced by the Treasury Department. The information would include country-by-country income, taxes paid and indicators of economic activity. The legislation would also require the disclosure of total pre-tax profits and the amount paid in state, federal, and foreign taxes by public companies.
In June, the Treasury Department issued rules requiring large companies—those with $850 million or more in annual revenue—to provide the Internal Revenue Service with financial data, including income and taxes paid, categorized by each country where they operate.
The bill was introduced Thursday by Rep. Rep. Mark Pocan, D-Wis., and is co-sponsored by Jan Schakowsky, D-Ill., Lloyd Doggett, D-Texas, and Gwen Moore, D-Wis.
“As corporations continue to dodge taxes by shifting massive profits to overseas tax havens, it is now more important than ever to increase transparency around these actions,” Pocan said in a statement. “My legislation will show exactly where public companies are paying their taxes and engaging in business activity so investors and the general public are able to assess investment risk and identify tax avoidance activities.”
Progressive groups praised the new legislation. “With nearly two and a half trillion dollars booked offshore and governments cracking down on abusive tax avoidance, shareholders are increasingly at risk from the dearth of information available to them about the tax practices of the companies in which they invest,” said Clark Gascoigne, deputy director of the FACT Coalition, in a statement. “One needs to look no further than the decision requiring Apple to pay billions in back taxes to understand the growing risk. The bill calls for the kind of transparency that makes markets safer, more stable and serves the needs of investors.”
Another advocacy group, Global Financial Integrity, also welcomed the legislation. “Today, neither legislators nor investors have any reliable information about multinationals’ profit shifting practices apart from the result of them—less revenue in the U.S. treasury and greater risk of enforcement actions worth billions of dollars,” said Heather Lowe, GFI’s legal counsel and director of government affairs, in a statement. “Legislators cannot possibly be expected to adopt measures to address a problem when they cannot access even the most basic data they need to fully understand it. The SEC is the primary place where that type of transparency can be required, and what the bill requires is simply a disaggregation of aggregate financial information that is already disclosed to the SEC.”
“This information is becoming more and more critical to investors as well,” said Global Financial Integrity President Raymond Baker. “The global crackdown on offshore tax havens and profit shifting exposes the companies that they invest in, and therefore their investments, to significant penalties if they’ve been found to be pushing the boundaries of acceptable tax planning. Investors need to have better insight into the decisions companies are making with respect to their tax arrangements so that investors can make better decisions about where they put their money.”
