* Country-by-country corporate reporting proposed
* Offshore credit default swap payments loophole hit
* Levin promises 2004 repatriation tax holiday study
By Kevin Drawbaugh
WASHINGTON, July 12 U.S. multinational
corporations would have to report financial results on a
country-by-country basis, potentially revealing much about
their offshore tax and accounting practices, under legislation
introduced in the Senate on Tuesday.
Saying that offshore tax abuses cost the government $100
billion a year in lost revenue, Democratic Senator Carl Levin
said his bill would additionally close a loophole that allows
credit default swap payments to escape taxation if sent from
the United States to persons offshore.
The outlook for the bill was not immediately clear. Levin
wants it folded into a deficit reduction package this year and
Democrats have called for closing offshore tax loopholes to be
part of a deficit solution.
"All in all, it strikes me as a bit of a hodgepodge," said
Scott Michael, a lawyer at Caplin & Drysdale in Washington, who
was dismissive of the measure's chances of full passage.
Parts of similar bills offered in the past by Levin have
made it into law, such as measures to curb abusive foreign
trusts and close offshore dividend tax loopholes.
"People are sick and tired of tax dodgers using offshore
trickery and abusive tax shelters to avoid paying their fair
share," Levin said in a statement. His bill, one in a series he
has offered in recent years, has five Senate co-sponsors.
"This bill offers powerful new tools to combat offshore and
tax shelter abuses, raise revenues and eliminate incentives to
send U.S. profits and jobs offshore," he said.
LEVELING THE PLAYING FIELD
The Levin bill would treat credit default swap payments
sent offshore as taxable U.S. source income. It would end
multinationals' ability to consolidate global financial results
with little or no country-by-country detail.
It would let the U.S. Treasury secretary take action
against countries or financial institutions that impede U.S.
tax enforcement while making it easier for the Internal Revenue
Service to understand and control offshore entities.
Corporations managed and controlled mainly in the United
States would not be able to claim foreign status and would be
taxed as domestic corporations under the measure, while
penalties slapped on tax evasion promoters would be stiffened.
Representative Lloyd Doggett, a fellow Democrat who like
Levin has pushed for many years to check offshore tax abuses,
will introduce companion legislation in the House of
"This bill offers specific ways to not only raise revenue,
but also level the playing field for small businesses and fix a
broken tax system that facilitates job loss, crime and economic
devastation," said Nicole Tichon, executive director of Tax
Justice Network, a tax fairness activist group.
"Any discussion of fiscal responsibility cannot stop at our
shores," Tichon said.
Another provision of the bill would treat as taxable U.S.
dollars and other assets physically deposited in U.S. accounts
but presently allowed to have offshore status.
REPATRIATION REPORT PROMISED
The Senate Permanent Subcommittee on Investigations, which
Levin chairs, will soon release a report on the results of the
Bush administration's 2004 offshore profits repatriation tax
holiday, he said.
Bush allowed multinationals then to bring back into the
United States approximately $299 billion in foreign profits
that they had stored away overseas to avoid paying the
35-percent corporate income tax rate. Bush allowed the profits
to be repatriated at a tax rate of just 5.25 percent.
At the time, Bush said the holiday would help boost jobs,
but studies have suggested that corporations instead used most
of the money for stock buybacks and shareholder dividends.
U.S. multinationals today have about $1 trillion in
offshore profits packed away in foreign jurisdictions and want
another holiday to bring them home at a discounted tax rate.
(Editing by Howard Goller)