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Category Archives: Legislation

Tax Havens: International Tax Avoidance and Evasion

CRS Report – Tax Havens: International Tax Avoidance and Evasion. Jane G. Gravelle, Senior Specialist in Economic Policy. January 15, 2015

“Addressing tax evasion and avoidance through use of tax havens has been the subject of a number of proposals in Congress and by the President. Actions by the Organization for Economic Cooperation and Development (OECD) and the G-20 industrialized nations also have addressed this issue. In the 111th Congress, the HIRE Act (P.L. 111-147) included several anti-evasion provisions, and P.L. 111-226 included foreign tax credit provisions directed at perceived abuses by U.S. multinationals. Numerous legislative proposals to address both individual tax evasion and corporate tax avoidance have been advanced. Multinational firms can artificially shift profits from high-tax to low-tax jurisdictions using a variety of techniques, such as shifting debt to high-tax jurisdictions. Because tax on the income of foreign subsidiaries (except for certain passive income) is deferred until income is repatriated (paid to the U.S. parent as a dividend), this income can avoid current U.S. taxes, perhaps indefinitely. The taxation of passive income (called Subpart F income) has been reduced, perhaps significantly, through the use of hybrid entities that are treated differently in different jurisdictions. The use of hybrid entities was greatly expanded by a new regulation (termed check the-box) introduced in the late 1990s that had unintended consequences for foreign firms. In addition, earnings from income that is taxed often can be shielded by foreign tax credits on other income. On average, very little tax is paid on the foreign source income of U.S. firms. Ample evidence of a significant amount of profit shifting exists, but the revenue cost estimates vary substantially. Evidence also indicates a significant increase in corporate profit shifting over the past several years. Recent estimates suggest losses that may approach, or even exceed, $100 billion per year. Individuals can evade taxes on passive income, such as interest, dividends, and capital gains, by not reporting income earned abroad. In addition, because interest paid to foreign recipients is not taxed, individuals can evade taxes on U.S. source income by setting up shell corporations and trusts in foreign haven countries to channel funds into foreign jurisdictions. There is no general third-party reporting of income as is the case for ordinary passive income earned domestically; the Internal Revenue Service (IRS) relies on qualified intermediaries (QIs). In the past, these institutions certified nationality without revealing the beneficial owners. Estimates of the cost of individual evasion have ranged from $40 billion to $70 billion. The Foreign Account Tax Compliance Act (FATCA; included in the HIRE Act, P.L. 111-147) introduced required information reporting by foreign financial intermediaries and withholding of tax if information is not provided. These provisions became effective only recently, and their consequences are not yet known. Most provisions to address profit shifting by multinational firms would involve changing the tax law: repealing or limiting deferral, limiting the ability of the foreign tax credit to offset income, addressing check-the-box, or even formula apportionment. President Obama’s proposals include a proposal to disallow overall deductions and foreign tax credits for deferred income, along with a number of other restrictions. Changes in the law or anti-abuse provisions have also been introduced in broader tax reform proposals. Provisions to address individual evasion include increased information reporting and provisions to increase enforcement, such as shifting the burden of proof to the taxpayer, increased penalties, and increased resources. Individual tax evasion is the main target of the HIRE Act, the proposed Stop Tax Haven Abuse Act, and some other proposals.”

 

70 Public Interest Groups and Companies Urge Congress to Update Email Privacy Law

“EFF, along with more than sixty civil liberties organizations, public interest groups, and companies sent two letters to the House and Senate leadership today. One supported the upcoming bipartisan Email Privacy Act by Reps. Kevin Yoder and Jared Polis, and the other supported the upcoming Electronic Communications Privacy Act Amendments Act by Sens. Mike LeeContinue Reading

FCC – Current Structure and Its Role in the Changing Telecommunications Landscape

The Federal Communications Commission: Current Structure and Its Role in the Changing Telecommunications Landscape. Patricia Moloney Figliola, Specialist in Internet and Telecommunications Policy. January 9, 2015. “The Federal Communications Commission (FCC) is an independent federal agency with its five members appointed by the President, subject to confirmation by the Senate. It was established by theContinue Reading

The Federal Minimum Wage: In Brief

The Federal Minimum Wage: In Brief. David H. Bradley, Specialist in Labor Economics. January 13, 2015. “The Fair Labor Standards Act (FLSA), enacted in 1938, is the federal legislation that establishes the minimum hourly wage that must be paid to all covered workers. The minimum wage provisions of the FLSA have been amended numerous timesContinue Reading

Regulatory agencies release public sections of resolution plans

“The Federal Reserve Board and the Federal Deposit Insurance Corporation (FDIC) today made available the public portions of resolution plans for firms with generally less than $100 billion in qualifying nonbank assets, as required by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act). The Dodd-Frank Act requires that certain banking organizations with totalContinue Reading

Review of the FBI’s Activities Under Section 702 of the FISA Amendments Act of 2008

A Review of the FBI’s Activities Under Section 702 of the FISA Amendments Act of 2008, September 2012 (January 9, 2015 version) — Executive Summary | Full Report/Redacted

ABA – 100 Years of Law

“It goes without saying that the world was a vastly different place in 1915 than it is today. But while the events of that year now carry the echoes of history, they also predicted some of the upheaval of the coming century. A year earlier, the outbreak of war in Europe, which quickly spread to theContinue Reading

POGO – Foreign Influence Database

“POGO’s Foreign Influence Database is based on informational materials filed by lobbying and public relations firms working on behalf of foreign entities in the U.S. The Foreign Agents Registration Act (FARA) requires advocates representing foreign interests to register with the Department of Justice and to file within 48 hours any informational materials disseminated to twoContinue Reading

DOT Fines Honda $70 Million for Reporting Failures

“The U.S. Department of Transportation’s National Highway Traffic Safety Administration (NHTSA) announced today that as a result of a NHTSA investigation, Honda will pay two $35 million civil penalties, for a total of $70 million, for failing to report deaths, injuries, and certain warranty claims to the federal government in violation of the TREAD Act. Continue Reading

The Political Question Doctrine: Justiciability and the Separation of Powers

CRS – The Political Question Doctrine: Justiciability and the Separation of Powers. Jared P. Cole, Legislative Attorney. December 23, 2014. “Article III of the Constitution restricts the jurisdiction of federal courts to deciding actual “Cases” and “Controversies.” The Supreme Court has articulated several “justiciability” doctrines emanating from Article III that restrict when federal courts will adjudicate disputes. One justiciability concept is the politicalContinue Reading

Congressional Oversight Manual

CRS – Congressional Oversight Manual. Alissa M. Dolan, Legislative Attorney; Elaine Halchin, Specialist in American National Government; Todd Garvey, Legislative Attorney; Walter J. Oleszek, Senior Specialist in American National Government; Wendy Ginsberg, Analyst in American National Government. December 19, 2014. “The Congressional Research Service (CRS) developed the Congressional Oversight Manual over 30 years ago, following a three-day December 1978 Workshop on Congressional Oversight and Investigations. The workshop was organizedContinue Reading

CBO Report on HR 30 Save Workers Act of 2015

As introduced in the House of Representatives on January 6, 2015 – “H.R. 30 would change how penalties are imposed under the Affordable Care Act (ACA) on employers that do not offer insurance (or offer insurance that does not meet certain criteria) and that have at least one full-time employee receiving a subsidy through aContinue Reading