New Legislation Would Combat Tax Haven Abuse, Increase Transparency and Accountability

New Legislation Would Combat Tax Haven Abuse, Increase Transparency and
Accountability

WASHINGTON, March 2 /PRNewswire-USNewswire/ -- The introduction today of
legislation to "restrict the use of offshore tax havens and abusive tax
shelters to inappropriately avoid Federal taxation" by Senator Carl Levin
(D-MI) represents a crucial step towards improving U.S. tax assessment and
collection, and increasing transparency and accountability in the global
financial system.

The Stop Tax Haven Abuse Act is similar to a previous bill, S. 681, introduced
by Senator Levin in 2007 and cosponsored by then-Senator Barack Obama with 3
significant new additions that would: (1) treat foreign corporations managed
and controlled in the United States as domestic corporations for income tax
purposes; (2)close an offshore tax dividend loophole that enables offshore
hedge funds and others to dodge payment of U.S. taxes on U.S. stock dividends;
and (3)expand the tax return reporting requirements for passive foreign
investment corporations (PFICs) to include U.S. persons who don't own a PFIC,
but have formed, sent assets to, received assets from, or benefitted from a
PFIC.

Current cosponsors of the Senate bill include Senators Sheldon Whitehouse
(D-RI), Claire McCaskill (D-MO), and Bill Nelson (D-FL). The House version
will be introduced by Representative Lloyd Doggett (D-TX) with multiple
cosponsors. The bill will be referred to the Committee on Finance in the
Senate, and to Ways and Means Committee in the House.

"The provisions set forth in this bill are designed to prevent the types of
illegalities and financial obfuscations that lay at the heart of the on-going
legal battle between U.S. authorities and Swiss bank UBS and the Stanford
Financial Group fraud case," said Global Financial Integrity (GFI) director
Raymond Baker.

"This is a systemic problem that goes beyond one or two financial
jurisdictions or dishonest individuals," added Baker. "Last December the
Government Accountability Office (GAO) released a report showing that 83 of
the 100 largest, publicly-traded U.S. companies and contractors have
subsidiaries in tax havens. Furthermore, four of those 83 companies are banks
which received $127 billion in TARP bailout funds. In the midst of historic
economic crisis the U.S. cannot afford to be complicit of these illicit
financial practices which cost the U.S. hundreds of billions of dollars every
year."

Highlights of the 84-page bill:

-- Establish presumptions for entities and transactions in Offshore
Secrecy
Jurisdictions;
-- Determine "Offshore Secrecy Jurisdictions;"
-- Authorize special measures against foreign jurisdictions, financial
institutions, and others that impede U.S. tax enforcement;
-- Treat foreign corporations managed and controlled in the United States
as domestic corporations for income tax purposes;
-- Allow more time for investigations involving Offshore Secrecy
Jurisdictions;
-- Increase disclosure of offshore accounts, transactions, and entities;
-- Prevent misuse of foreign trusts for tax evasion;
-- Limit legal opinion protection from penalties with respect to
transactions involving Offshore Secrecy Jurisdictions;
-- Close the offshore dividend tax loophole;
-- Increase penalty for failing to disclose offshore holdings;
-- Require anti-money laundering rule for hedge funds;
-- Apply anti-money laundering obligations to company formation agents;
-- Strengthen John Doe summons use in offshore tax cases;
-- Strengthen foreign financial account reporting requirements;
-- Strengthen tax shelter penalties;
-- Deter financial institution participation in abusive tax shelter
activities;
-- Strengthen law enforcement through information sharing;
-- Require tougher tax shelter opinion standards for tax practitioners.

"From the European Commission's recent adoption of measures to improve
cooperation between EU member states and increase transparency in tax
assessment and collection to the G-20's stated intent to crack down on tax
havens when they meet in April, calls around the world are growing for
definitive action on the problem of tax havens," said Mr. Baker.

Global Financial Integrity (GFI) promotes national and multilateral policies,
safeguards, and agreements aimed at curtailing the cross-border flow of
illegal money. In putting forward solutions, facilitating strategic
partnerships, and conducting groundbreaking research, GFI is leading the way
in efforts to curtail illicit financial flows and enhance global development
and security.

For additional information please visit www.gfip.org.

SOURCE Global Financial Integrity

Monique Perry Danziger of Global Financial Integrity, +1-202-293-0740