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Levin Calls for Crackdown on Offshore Tax Havens

John Cummings February 24th, 2009

Around $100 billion — that’s how much the U.S. treasury loses each year as a result of corporations’ addiction to offshore tax havens, according to Senator Carl Levin (D-MI).

Levin and Reps. Rosa DeLauro (D-CT), Lloyd Doggett (D-TX), and Sander Levin (D-MI) want the Obama administration’s fiscal year 2010 budget to include an array of measures aimed at shutting down what they describe as “offshore tax abuses.”

Last month, a GAO report commissioned by Levin and Senator Byron Dorgan (D-MD) revealed that a majority of the biggest U.S. publicly traded companies and federal contractors own subsidiaries in offshore tax havens or financial privacy jurisdictions, and some own hundreds (as I reported here). In a letter to Peter Orszag, director of the Office of Management and Budget, Levin and the three House Democrats are calling for some tough measures to “prevent taxpayers from hiding their income offshore,” including “establishing presumptions to combat offshore secrecy, imposing tougher requirements on U.S. taxpayers using offshore secrecy jurisdictions, giving the Treasury Department authority to take special measures against offshore financial institutions impeding U.S. tax enforcement, strengthening detection of offshore activities, and strengthening penalties for firms abusing such jurisdictions.”

Levin’s previous attempt to introduce these deterrents, in the form of the Stop Tax Haven Abuse Act, died in the last session. But with the Congressional numbers now on his side — and, no doubt, the support of President Obama, who co-sponsored the 2007 bill — the chances are good that Levin will get what he wants this time around.

Plus, Levin clearly sees an opportunity to ride a wave of outrage over the deployment of the Troubled Asset Relief Program. Many of the firms listed in the GAO report are TARP recipients. For example, Morgan Stanley, which has 273 subsidiaries in tax havens or financial privacy jurisdictions such as the Cayman Islands, Luxembourg, and the Marshall Islands, has received $10 billion from the fund. Citigroup, with 427 subsidiaries in such jurisdictions, and Bank of America, with 115, have each received $45 billion. ###

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2 Comments to “Levin Calls for Crackdown on Offshore Tax Havens”

Laurie Brannen Says:

February 26th, 2009 at 12:38 pm

As I write my annual check to the IRS–after withholding a hefty sum from my paycheck throughout the entire year–I’m toying with the idea of going to a tropical location beyond the U.S., ordering a drink with a cute little paper umbrella and plopping down on the sand with a good book. But, wait, I can’t because I pay my taxes and there’s no money left.

Maybe this will be the year Congress tells corporations their “day in the sun” is over. Until then, these businesses aren’t really breaking the law and their shareholders are sharing the benefits.
John Cummings Says:

February 26th, 2009 at 1:16 pm

Well, enjoy your imaginary vacation! I’d recommend Bermuda or the Cayman Isles.

True enough, these companies are not breaking any laws by stashing money in these places, and even describing the practice as “abuse” is questionable, given the long-recognized need to offset the double taxation of overseas revenue (by the local jurisdiction and by the U.S. on repatriation of the profits.) But the writing is on the wall for organizations that have hundreds of these subsidiaries, especially the TARP recipients.