Global Financial Integrity

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Stop Tax Haven Abuse Act Would Protect U.S. Taxpayers, Curb Eurocrisis, Assist Developing Countries

Clark Gascoigne, +1 202 293 0740 ext. 222

On U.S. Tax Day, Rep. Lloyd Doggett (D-TX) Introduces Legislation to Close Offshore Tax Loopholes and Foster Transparency

5 More European Nations Join Compact to Automatically Exchange Tax Information Multilaterally

WASHINGTON, DC – As the deadline arrived Monday for Americans to file their tax returns, U.S. Rep. Lloyd Doggett (D-TX) introduced the Stop Tax Haven Abuse Act (STHA) to initiate transparency measures and close several offshore tax loopholes that cost the United States Treasury an estimated $150 billion every year.  Beyond boosting tax revenue in the U.S., Global Financial Integrity (GFI) praised the legislation for its impact on developing nations, which lose an estimated $1 trillion per year in illicit outflows of money due to tax haven secrecy.

“Adopting the Stop Tax Haven Abuse Act would be a major victory for U.S., European, and developing country taxpayers,” said Raymond Baker, director of GFI, a Washington-DC based research and advocacy organization. “It would scrap several egregious offshore tax loopholes—helping to level the playing field between small businesses and multinational corporations, increasing information and transparency for investors, and strengthening law enforcement and tax collection abilities.”

According to Rep. Doggett’s office, the “Stop Tax Haven Abuse Act aims to close several different loopholes by deterring the use of tax havens for tax evasion and strengthening the enforcement of our tax laws. The bill would also require SEC-registered corporations to report annually on the number of employees, sales, financing, tax obligations, and tax payments on a country-by-country basis, shedding more light on the extent of use of tax havens. This bill also provides for additional penalties for failing to disclose offshore holdings and for promoting abusive tax shelters.”

Country-by-Country Reporting Provisions Key

GFI particularly highlighted the positive nature of the STHA’s country-by-country reporting provisions, requiring companies registered with the U.S. Securities and Exchange Commission (SEC) to disclose their employee levels, sales, profits, and tax payments on a country-by-country basis.

“Disclosing this information will make it much more obvious when companies are artificially shifting their profits to low- and no-tax countries to dodge taxes, at a time when rich and poor nations alike are struggling to collect enough revenue,” added Heather Lowe, GFI’s legal counsel and director of government affairs.  “Country-by-country reporting will provide invaluable information to shareholders as they weigh the risks of investing in particular companies, and it will provide crucial data to government agencies, civil society, and the media as they investigate and crackdown on abusive tax avoidance and evasion.”

Country-by-country reporting is no longer a radical concept.  The Cardin-Lugar provisions (section 1504) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, passed in 2010, currently require all oil, gas, and mining companies registered with the SEC to report on payments made to foreign governments on a country-by-country and project-by-project basis.  Last week, the European Union announced that it will require large, privately-owned European companies and E.U.-listed firms operating in the oil, gas, mining, and logging sectors to disclose information on payments made to governments on the same basis.  The E.U. announced in late February that it would move to require all financial institutions to disclose profits made, taxes paid, subsidiaries, and staff levels on a country-by-country basis.  While GFI praised all three of these developments, it noted the need for expanding the transparency requirements to companies operating in all sectors.

“Transparency in the financial and extractive sectors is vitally important,” said Mr. Baker, GFI’s director. “However, corruption and abusive tax dodging are not unique to banks and oil companies. Indeed, our research shows that the developing world loses roughly $1 trillion per year to crime, corruption, and tax evasion. The Greek economy hemorrhaged $261 billion in illicit outflows from 2003-2009 in the lead-up to the debt crisis. This is a systemic problem caused largely by the opaque, secretive global financial system. The country-by-country reporting provisions included in the Stop Tax Haven Abuse Act would go a long way toward curtailing these types of illicit flows.”

A related piece of legislation—the Cut Unjustified Tax Loopholes Act (S. 268, CUT Loopholes Act)—was introduced in the Senate in February by Sen. Carl Levin (D-MI) and Sen. Sheldon Whitehouse (D-RI).  The CUT Loopholes Act contains many similar legislative proposals including the country-by-country reporting provision.

Multilateral Automatic Tax Information Exchange Expands

The governments of the Czech Republic, Poland, Belgium, the Netherlands, and Romania announced over the weekend that they would be joining a multilateral initiative to exchange tax information automatically introduced last week by the governments of France, Germany, Italy, Spain, and the United Kingdom.  GFI heralded last week’s announcement from the original five governments as a “resounding victory for taxpayers and transparency groups.”  The new participants bring the total number of countries committed to engaging in the program up to ten.

“We strongly welcome the commitments from the Czech Republic, Poland, Belgium, Romania, and the Netherlands to participate in the multilateral automatic exchange of tax information,” noted Mr. Baker.  “Automatic tax information exchange ensures that tax authorities and law enforcement in these countries will have the necessary records they require to detect and deter billions of dollars in tax evading money.”

GFI research finds (PDF) that Poland suffered $40.77 billion in illicit financial outflows between 2001 and 2010, while Romania lost $8.84 billion in illegal capital flight over the same period.  The eight other countries participating in the program are considered advanced economies by the IMF, thus GFI does not have illicit outflow estimates for them.

“It’s fantastic to see the original pilot program expanding so quickly to include more countries—particularly emerging countries like Poland and Romania—but it’s extremely important that the convention be extended to include more developing and emerging economies in Europe and beyond as soon as possible,” added Ms. Lowe. “Indeed, the end goal must be a global system of automatic exchange of tax information.”

“There has been a seismic shift over the past few years in the discussion of tax information exchange,” continued Ms. Lowe.  “The global paradigm has shifted, and it’s irreversible. The G20, G8, OECD, and others must now acknowledge that the international standard for information exchange is the multilateral automatic exchange of tax information. It’s time to hop on the train or get left behind.”


Notes to Editors:

  • To schedule an interview with Mr. Baker, Ms. Lowe or other GFI spokespersons, contact Clark Gascoigne at +1 202 293 0740, ext. 222 / On-camera spokespersons are available in Washington, DC.
  • Click here to read the press release from Rep. Lloyd Doggett (D-TX) on the Stop Tax Haven Abuse Act.
  • Click here (PDF) to read the full text of the Stop Tax Haven Abuse Act.
  • Click here for more information generally on country-by-country reporting.
  • Click here for more information on the CUT Loopholes Act.
  • Click here for news coverage from The New York Times on the commitments from the Czech Republic, Poland, Belgium, Romania, and the Netherlands to participate in the multilateral automatic exchange of tax information.
  • Click here for more information from GFI on last week’s announcement from the Governments of France, Germany, Italy, Spain, and the UK.
  • Click here to read the press release from HM Treasury announcing the multilateral tax action last week.
  • Click here (PDF) to read the joint letter from the Governments of France, Germany, Italy, Spain, and the UK to the European Commission announcing last week’s multilateral action and encouraging other members of the European Union to join them.
  • Click here for more information generally on the automatic exchange of tax information.


Clark Gascoigne
+1 202-293-0740 ext.222


Global Financial Integrity (GFI) is a Washington, DC-based research and advocacy organization which promotes transparency in the international financial system as a means to global development.

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