House Republicans should slow down their consideration of a tax-overhaul bill after investigative reports Sunday alleged offshore tax-avoidance by U.S. multinational companies including Apple Inc. and Nike Inc., congressional Democrats and tax-advocacy groups said.
But the Republican chairman of the House Ways and Means Committee indicated Sunday that the panel would stick to its plans to consider the bill this week. Representative Kevin Brady said he believes lawmakers “have a pretty good handle” on how to address the erosion to the U.S. tax base that results when corporations shift profit offshore. House leaders want to pass the bill by Thanksgiving, in roughly 2 1/2 weeks.
The bill that Brady released last week would impose a 20 percent excise tax on certain payments that U.S. companies make to overseas affiliates -- a potential source of profit shifting to tax havens. It also called for a tax of roughly 10 percent on some foreign profits for corporations going forward. The excise tax measure has already drawn opposition.
For individual investors, the bill contains a provision aimed at curbing a strategy under which investments are routed through reinsurance companies in tax havens to gain a U.S. tax break. While the legislation doesn’t name specific industries or countries, hedge funds have used the strategy in Bermuda, which doesn’t levy a corporate income tax.
In all, the bill is “very weak” on combating aggressive tax evasion by both corporations and individuals, said Jack Blum, a Washington lawyer who’s an expert on financial crime and international tax abuse. Blum is a former staff counsel to the Senate Foreign Relations Committee who played a key role in congressional investigations that led to the Foreign Corrupt Practices Act in 1977.
Trump Administration
Reports Sunday by an international journalism organization and the New York Times cited a trove of undisclosed documents linking high-ranking officials in President Donald Trump’s administration -- including Commerce Secretary Wilbur Ross and White House economic adviser Gary Cohn -- to extensive holdings in offshore tax havens such as the Cayman Islands and Bermuda. For that reason, Ross and Cohn shouldn’t participate in discussions related to the tax overhaul, officials with two international policy groups said.
Initial reports about Apple, Nike, Ross and Cohn don’t allege any behavior that would violate U.S. tax law. Based on the reporting that appeared Sunday, “nothing here is necessarily illegal,” said H. David Rosenbloom, an international tax lawyer at Caplin & Drysdale and a former senior Treasury tax official in the late 1970s. “There’s nothing illegal about Americans having either an offshore account or an interest in an offshore company.”
Nonetheless, the disclosures suggest that the rapid schedule House leaders plan to use to advance their tax bill is inadequate, said Clark Gascoigne, the deputy director of the Financial Accountability and Corporate Transparency, or FACT, Coalition. The non-partisan policy group focuses on combating offshore tax abuse.
‘All the Documents’