The Financial Accountability and Corporate Transparency Coalition (FACT), a group of more than 100 companies and nonprofits, on Monday urged the Treasury Department to clamp down on corporate inversions.
“We believe that Treasury should expand its prior [limits on] the ability of expatriating firms to use so-called ‘hopscotch loans’ and to de-control their controlled foreign corporations to avoid paying taxes that they owe on untaxed offshore earnings,” the coalition’s interim executive director, Clark Gascoigne, wrote in a letter to Treasury Secretary Jacob Lew.
Even lowering the threshold for compliance to 50% ownership by the original shareholders, rather than the current 60% threshold, could curb a significant amount of inversion-enabled tax avoidance, Gascoigne said.
“While legislation to curb these inversions would be ideal, the political reality is that Congress is unlikely to act before next year,” he wrote. “Unfortunately, the many planned inversions — such as those by Pfizer, IHS, and Johnson Controls — show that immediate action is needed to prevent a significant erosion in the corporate tax base.”
Gascoigne cited a Citizens for Tax Justice study that found U.S. companies likely owe as much as $695 billion on the $2.4 trillion in earnings they hold offshore.
“The gaming of our international tax system exacerbates economic inequality; drains revenue out of both developed and developing countries; hurts legitimate businesses, families, and communities; and undermines our country’s ability to govern,” he wrote. “It is time we eliminate this egregious offshore loophole to make sure that the corporations that benefit from all of the resources, protections, and markets in the United States pay their fair share of taxes.”
The Hill reported that Lew has received similar letters from Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) and another group of organizations that includes members of the FACT Coalition.