This week (May 9-13)

Congress back: The House and Senate are in session.

Ways and Means subcommittee hearing: On Thursday, May 12 (at 10 a.m.), the House Ways and Means Tax Policy Subcommittee will hold a hearing on Member proposals for improvements to the US tax system.

Last week (May 2-6)

President's efforts to combat tax evasion: On May 6, the President announced steps intended to combat money laundering, corruption, and tax evasion, and in doing so cited the "Panama Papers" that the White House said demonstrated "that people around the globe have been using anonymous, offshore shell companies and other entities in order to hide their business and assets from authorities." The Treasury Department finalized a customer due diligence rule, which requires banks, mutual funds, and other financial institutions to identify and verify who owns and profits from the companies that make use of their services, i.e., the "beneficial owner." Treasury also proposed requiring certain foreign-owned companies to obtain a tax identification number from the IRS, requiring them to report ownership and transaction information. "Taken together, these steps go a long way in helping to combat money laundering and tax evasion, but additional tools are needed to promote transparency and strengthen law enforcement," the White House said. "And only Congress can help on that front." Among the actions the President called on Congress to take is to approve the eight outstanding tax treaties. The treaties, which were approved by the Senate Foreign Relations Committee in November, include: new protocols amending US tax treaties with Switzerland, Luxembourg, Spain and Japan; new tax treaties with Hungary, Chile and Poland; and a multilateral convention on tax administration. Senator Rand Paul (R-KY) has opposed ratifying the treaties, citing the scope of potential information sharing they would allow. "I'm calling on the Senate — in particular, Senator Rand Paul, who has, you know, been a little quirky on this issue — to stop blocking the implementation of tax treaties that have been pending for years," President Obama said in a news briefing. "And these treaties actually improve law enforcement's ability to investigate and crack down on offshore tax evasion. And I'm assuming that's not something that he's in favor of." The President noted that he has put forward proposals to close tax loopholes, but said he did not expect action on tax reform this year. "I think it's fair to say that Congress will not act on a big tax reform plan before the election that would shut down some of these loopholes," the President said. "But what my administration has been doing is to look for steps that we can take on our own to make the tax system fair."

Stack on business community involvement: During the Urban-Brookings Tax Policy Center event May 3, "How foreign tax changes affect U.S. businesses and the prospects for tax reform," Bob Stack, Deputy Assistant Secretary of International Tax Affairs, U.S. Department of the Treasury, said there is a need for greater involvement by the community of multinational corporations in the international tax debate. Stack said the serious and aggressive nature of the OECD BEPS project took the business community by surprise and, as an example of how tax transparency has shot to the top of the global tax policy agenda, he pointed to the European Union's proposals relating to public reporting, which were spurred in part by the release of the Panama Papers. (The European Commission April 12 proposed an initiative to require large multinational companies to disclose publicly for at least five years their profits, taxes, employee headcount and other information for each European Union country in which they operate, and for certain tax haven jurisdictions.) No amount of lobbying will stop the pressure for global transparency, he said. Stack also said we are long past the days when Congress and the executive branch were the only important players in the tax debate: globalization has brought new issues to the world stage and the actions of countries must be taken into account. He said it is his view that if the community of multinational corporations has a compelling perspective on the international tax debate, it is not being communicated effectively. The message needs to evolve beyond the assertion that companies pay taxes owed, in order to combat the perception that corporations do not pay their full share, that profit shifting is rampant, and therefore that action is needed to rein it in, he suggested. Stack suggested that the global tax environment has become unstable, due to issues related to intellectual property and tax havens and the perception that low effective tax rates of multinational corporations indicate that they are not paying their fair share. Unless US international tax reform takes a major step toward restoring stability, he argued, countries will continue to take unilateral and targeted actions based on the perception that companies are engaged in tax arbitrage and tax planning.

Quote of the Week

"Congress should raise the minimum wage. This is something that would not only help those individuals who are getting a bigger paycheck, but it also means they're spending more, and that would be a boost to business. To level the playing field for American workers and to crackdown on unfair foreign competition, they should pass smart, new trade agreements. And Congress should reform out tax code to promote growth and job creation, which includes closing wasteful loopholes and simplifying the tax code for everybody." — President Obama, May 6

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