Carl Levin introduces legislation to stop tax haven abuse

by: jsalera

Wed Jul 13, 2011 at 11:54:23 AM EDT

Bob Chapman’s July 13, 2011 edition of the International Forecaster (paid subscription – link not yet available) reports that Tuesday Senator Carl Levin Carl introduced a bill that “would change Internal Revenue Service regulations that allow American traders of credit-default swaps to avoid paying federal taxes on many transactions that begin in the United States.”

The International Forecaster

Saying that offshore tax havens deprive the United States Treasury of tens of billions of dollars of revenue a year, two senior Democratic senators are pushing to help reduce the federal deficit by tightening rules that allow hedge funds, derivatives traders and corporations to skirt federal taxes.

A bill introduced Tuesday by Senator Carl Levin, chairman of the permanent subcommittee on investigations, would change Internal Revenue Service regulations that allow American traders of credit-default swaps to avoid paying federal taxes on many transactions that begin in the United States. It would also tighten rules that enable some hedge funds and corporations based in the United States to reduce their federal tax liabilities by declaring themselves foreign companies and moving a small part of their operations overseas.

In an effort to discourage companies from using bookkeeping maneuvers to shift their profits to tax havens, the measure would also require American corporations to provide the Securities and Exchange Commission, and the public, with a country-bycountry breakdown of their sales, employment and operations.

Senator Levin, a Michigan Democrat who has spent years investigating tax avoidance schemes, estimates that abuse of offshore havens costs the Treasury more than $100 billion a year and said his proposal could provide a breakthrough in the stalled deficit-reduction negotiations between President Obama and Congress. Mr. Obama has refused to approve a deal that does not include increased revenues, and Republicans have said they will oppose any measure that increases taxes. Mr. Levin said his plan offers a compromise by closing loopholes used by corporations and investors, many of whom have continued to reap profits during the economic downturn while minimizing tax liability.

It is unclear whether either the president or Republicans who control the House of Representatives would consider making the proposal part of their negotiations.

But the chairman of the Senate Budget Committee, Kent Conrad, a North Dakota Democrat, said on Monday that closing offshore loopholes had the potential to pare more than $1 trillion from the budget deficit over the next decade. Introducing his own plan to cut $4 trillion from the deficit with a combination of spending cuts and revenue increases, Mr. Conrad said that by taking aim at the tax shelters identified by Senator Levin, the federal government could reduce the deficit and lower the corporate rate to 29 percent from 35 percent without increasing taxes on the middle class or imposing severe cuts on Medicare or Social Security benefits.

“Let’s go after offshore tax havens, abusive tax shelters,” Mr. Conrad said during a speech on the Senate floor. “Let’s shut them down.”

Senator Levin released a Press Release yesterday that is posted on his website. The Press Release with links to the bill, its summary and his floor statement can found here.