House Republicans should slow down their consideration of a tax-overhaul bill after investigative reports Sunday highlighted what journalists called offshore tax-avoidance by U.S. multinational companies including Apple Inc. and Nike Inc., advocates for tax fairness said.
Reports by an international journalism organization and the New York Times also tied high-ranking officials in President Donald Trump’s administration -- including Commerce Secretary Wilbur Ross and White House economic adviser Gary Cohn -- to extensive holdings in offshore tax havens such as the Cayman Islands and Bermuda. For those reasons, Ross and Cohn shouldn’t participate in discussions related to the tax overhaul, officials with two international policy groups said.
Initial reports about Apple, Nike, Ross and Cohn don’t allege any behavior that would violate U.S. tax law. Based on the reporting that appeared Sunday, “nothing here is necessarily illegal,” said H. David Rosenbloom, an international tax lawyer at Caplin & Drysdale and a former senior Treasury tax official from in the late 1970s.
“There’s nothing illegal about Americans having either an offshore account or an interest in an offshore company.”
Nonetheless, the disclosures show the rapid schedule that House leaders plan to use to advance their tax bill is inadequate, said Clark Gascoigne, the deputy director of the Financial Accountability and Corporate Transparency, or FACT, Coalition. The non-partisan policy group focuses on combating offshore tax abuse.
'DOESN'T MAKE SENSE'
“It doesn’t make sense to move forward with marking up the tax bill before we can see all the documents,” Gascoigne said in an interview Sunday. The reports are based on 13.4 million documents obtained by the International Consortium of Investigative Journalists, or ICIJ. The documents haven’t been publicly released.
“There are serious concerns about what this tax bill would do to address these offshore problems,” Gascoigne said.
Additional reporting is expected -- perhaps as early as Monday. On Sunday, ICIJ reported that an offshore law firm named Appleby -- which produced many of the leaked documents -- had overseen the business affairs of a wide assortment of prominent U.S. hedge-fund executives, corporate leaders and private-equity partners, including: Paul Singer, Steve Schwarzman, Carl Icahn, Robert Mercer, Sheldon Adelson, Steve Wynn, Tom Barrack and brothers Charles and David Koch.
While current U.S. tax law permits individuals to use an array of offshore accounting maneuvers to minimize their taxes, many such strategies could be politically combustible as additional details are released.
House Ways and Means Chairman Kevin Brady said Sunday that he believes U.S. lawmakers “have a pretty good handle” on how to address what he called the tax-base erosion that stems from shifting profit offshore. “So we’re incorporating that,” he said. The panel will begin hearings on the legislation Monday. House Speaker Paul Ryan has said he wants to pass the legislation through the House by Thanksgiving, roughly 2 1/2 weeks from now.
During a break from a meeting of Ways and Means Republicans Sunday afternoon, Representative Mike Kelly of Pennsylvania said he hadn’t heard any discussion of the news reports. But House Minority Leader Nancy Pelosi’s office called for committee hearings to explore the reports.
“Only by understanding the potential abuses that would occur through offshoring under the Ryan-McConnell proposal can Congress write a code that ensures that everyone pays their fair share,” said Pelosi aide Drew Hammill.
“These reports also raise questions about a number of Trump allies, his billionaire buddies, and multinational corporations worldwide that have so much to gain from this Republican tax bill,” said Representative Lloyd Doggett of Texas, the top Democrat on the Ways and Means’ Subcommittee on Tax Policy. He also called for delaying consideration of the legislation.
The House tax bill would cut the corporate income tax to 20 percent from 35 percent and cut individual income-tax rates for most. It also contains provisions related to international taxes -- including a 20 percent excise tax on U.S. companies’ payments to offshore affiliates that has already drawn some initial opposition.
“Congress must immediately halt action on the proposed tax bill and launch a comprehensive investigation into the activities revealed by these leaks,” said Gawain Kripke, policy director for Oxfam America, an anti-poverty group that’s among the donors to the FACT Coalition.
“The House Ways and Means Committee should postpone its planned mark-up of the bill,” Kripke said.
Others disagreed. “It shows why the tax-reform elements within the tax-cut package are so important and why it is so vital to move quickly,” said John Feehery, a Republican lobbyist and former House leadership aide.
With regard to Apple, the ICIJ report said documents show the company “shopped around Europe and the Caribbean for a new island tax shelter after a U.S. Senate inquiry found that the tech giant had avoided tens of billions of dollars in taxes by shifting profits into Irish subsidiaries.”
The report cited one email exchange in which Apple’s lawyers asked the Appleby law firm to confirm that a move to an offshore tax haven would allow one of the company’s Irish units to “conduct management activities ... without being subject to taxation in these jurisdictions.”
A spokesman for Apple declined to comment. The ICIJ reported that the company said it explained the new arrangements to government authorities and that they did not reduce the company’s tax payments.
European Union regulators have told the Irish government it must collect back taxes totaling 13 billion euros (uS$15.1 billion) from Apple, saying the country offered the company tax benefits that gave it an improper competitive edge. The EU has cracked down on other U.S. companies as well.
A report that’s also based on the documents and was published by the Organized Crime and Corruption Reporting Project contains a brief mention of Nike. It says: “The files also reveal how big corporations cut their taxes by creating offshore shell companies to hold intangible assets such as the design of Nike’s ‘Swoosh’ logo and the creative rights to silicone breast implants.”
Nike didn’t immediately respond to a request for comment.
Based on the documents unearthed by the ICIJ, the New York Times reported Sunday that Ross retained investments in a shipping firm he once controlled that has significant business ties both to a Russian oligarch who is subject to American sanctions and to President Vladimir Putin’s son-in-law. The Times report also said the files contain references to Cohn, “who was associated with 22 Bermuda entities” in his previous roles at Goldman Sachs Group Inc.
Cohn was Goldman’s president and chief operating officer before he joined Trump’s administration. He played a leading role in negotiating the tax framework that preceded the House bill that emerged last week.
The White House press office didn’t immediately respond to request for comment. Trump and several members of the administration are traveling in Asia this week.
--With assistance from Sahil Kapur David Kocieniewski and Colleen Murphy of Bloomberg BNA.