Senate Floor Speech on Offshore Tax Loophole Amendment, S.A. 1818
The Senate adopted this amendment to S. 1813, the highway bill, by voice vote.
Thursday, March 8, 2012
Our amendment offers one provision from the Cut Unjustified Tax Loopholes Act, S.2075, which Sen. Conrad and I introduced some weeks ago. I continue to hope and believe that momentum is building behind the idea of real tax reform and in support of legislation like the CUT Loopholes Act to comprehensively tackle the many tax loopholes that favor a few taxpayers over ordinary American taxpayers. Closing tax loopholes is critical to real deficit reduction, and restoring lost revenue that will allow us to cut the deficit without slashing important programs. With the threat of sequestration looming at the end of this year, it is more vital than ever that we find bipartisan agreement on closing tax loopholes.
Our amendment hopefully will advance that goal. The full CUT Loopholes Act attacks loopholes in two areas. First is closing offshore tax loopholes, a subject that the Permanent Subcommittee on Investigations, which I chair, has explored for years. Second is the stock-option loophole, a corporate tax giveaway that forces American taxpayers to subsidize corporations for the stock-options granted to their executives. The Levin-Conrad amendment takes one provision from the offshore portion of the CUT Loopholes Act.
Our amendment would give regulators a powerful tool to stop offshore tax havens and their financial institutions that impede U.S. tax enforcement from doing business in the United States. The Levin-Conrad amendment is modeled on the successful provision in the Patriot Act now used to combat foreign financial institutions and jurisdictions engaged in money laundering.
Under section 311 of the Patriot Act, Treasury can take a range of measures against foreign financial institutions or jurisdictions that it finds to be of “primary money laundering concern.” The Levin-Conrad amendment would authorize Treasury to impose the same types of measures on the same types of entities if Treasury finds them to be “significantly impeding U.S. tax enforcement.” Treasury could, for example, prohibit U.S. banks from accepting wire transfers or honoring credit cards from those foreign banks. The provision would not require Treasury to act; it would give Treasury the authority and discretion to take action against foreign jurisdictions or banks that are facilitating U.S. tax evasion and tax avoidance.
Over the last several days, we have worked with the Administration and others to improve our amendment. We have made changes to clarify that it covers significant impediments to tax enforcement, and that foreign jurisdictions and financial institutions that are complying with the Foreign Account Tax Compliance Act will be viewed favorably with respect to their level of assistance with our tax enforcement efforts.
Each year, the United States loses an estimated $100 billion in tax revenue from U.S. taxpayers using offshore tax havens to dodge their U.S. tax obligations, including through hidden accounts at tax haven banks. My Subcommittee has held several hearings and issued a lengthy bipartisan report showing how some tax haven banks have used an array of abusive practices to help U.S. clients hide assets and income from Uncle Sam. We presented detailed case histories involving tax haven banks that helped thousands of U.S. clients dodge their U.S. taxes, banks that used a long list of secrecy tricks to make it nearly impossible for U.S. tax authorities to trace funds sent to them offshore.
Those tricks included using code names for clients to disguise their identities; directing personnel to use pay phones instead of business phones to make it harder to trace calls back to the bank; providing bankers with encrypted computers when travelling to keep client information out of the reach of U.S. tax authorities; funneling money through offshore corporations to conceal incriminating wire transfers and make audits difficult; opening accounts in the names of offshore shell companies to hide the real owners; and providing bankers with counter-surveillance training to detect and deflect inquiries from government officials.
That kind of conduct, which actively facilitates tax evasion, amounts to a declaration of war by offshore secrecy jurisdictions against honest, hardworking taxpayers. It’s time to fight back and end the abuses inflicted on us by those tax havens. Congress took one step two years ago by requiring foreign banks with U.S investments to disclose accounts opened by U.S. persons or pay a hefty tax on their U.S. income. But that law doesn’t apply to tax haven banks that avoid U.S. investments. The United States needs authority to take special measures against foreign banks that not only refuse to disclose accounts opened by their U.S. clients, but also significantly impede U.S. tax enforcement efforts. Our amendment would enable the United States to fight back by authorizing the Treasury to tell U.S. banks to stop doing business with those aiders and abettors of U.S. tax evasion.
According to the Joint Committee on Taxation, we could, by adopting this amendment, reduce the deficit by $900 million over 10 years. That is an indication of how closing just one of many loopholes can raise significant revenue. The CUT Loopholes Act would, conservatively, reduce the deficit by $155 billion over 10 years. And other tax loopholes not addressed in the CUT Loopholes Act, such as the carried-interest and blended-rate loopholes, offer additional opportunities for deficit reduction.
Mr. President, we face difficult choices in the months ahead. We all agree that we must reduce the deficit. But the American people also expect us to make sure that we are protecting national security, that parents can still send their kids to college, that our citizens still have health care, that we are repairing roads and bridges. We must do both -- reduce the deficit and protect important priorities. But we cannot accomplish those twin goals unless we restore revenue lost in part to the gaping loopholes in our tax law. With this amendment, we can take a step down the path of closing abusive loopholes, and continue building momentum for the work we must to in the months ahead.