Senator Levin, DeLauro, Doggett and Rep. Levin Urge the Administration to Address Tax Haven Abuse in Budget

Kevin Brennan (DeLauro) 202-225-3661

Tara Andringa (Senator Levin) 202-228-3685

Wyeth Ruthven (Doggett) 202-225-4865

Washington, DC – In a letter to Office of Management and Budget Director Peter Orszag, U.S. Senator Carl Levin (D-MI) and Reps. Rosa DeLauro (D-CT), Lloyd Doggett (D-TX) and Sander Levin (D-MI) today urged the Obama Administration to include measures from the Stop Tax Haven Abuse Act in its upcoming fiscal year 2010 budget proposal in order to prevent corporations from hiding their incomes offshore at an annual cost of approximately $100 billion to the federal government. The letter cites a recently released Government Accountability Office (GAO) report which found that 83 of the 100 largest publicly traded U.S. corporations, including several that are receiving billions of dollars in taxpayer money through the Treasury's financial rescue program, and 63 of the 100 largest U.S. federal contractors reported having subsidiaries in tax havens or financial privacy jurisdictions.

The Stop Tax Haven Abuse Act, introduced in the House by Representative Doggett and the Senate by Senator Levin last session (H.R.2136, S.681) and soon to be reintroduced, would deter the use of offshore secrecy jurisdictions, strengthen detection of offshore abuses, increase penalties on tax shelter promoters, close offshore tax loopholes, empower the Treasury Department to act against foreign jurisdictions that impede U.S. tax enforcement, beef-up disclosure of offshore transactions, and prohibit the issuance of tax shelter patents.

"We write to express our deep concern with the continued practice by most of the United States' largest publicly traded companies - including many federal contractors and recipients of financial bailout funds - of using offshore tax havens or financial privacy jurisdictions to avoid paying U.S. taxes," the lawmakers write in the letter. "With estimated annual revenue losses of $100 billion a year as a result of corporations hiding their income offshore, we strongly urge you to consider proposals for shutting down offshore tax abuses as you craft the administration's proposed fiscal year 2010 budget."

February 20, 2009

The Honorable Peter Orszag

Director

Office of Management and Budget

Eisenhower Executive Office Building

725 17th Street, NW

Washington, DC 20503

Dear Director Orszag,

We write to express our deep concern with the continued practice by most of the United States' largest publicly traded companies - including many federal contractors and recipients of financial bailout funds - of using offshore tax havens or financial privacy jurisdictions to avoid paying U.S. taxes. With estimated annual revenue losses of $100 billion a year as a result of corporations hiding their income offshore, we strongly urge you to consider proposals for shutting down offshore tax abuses as you craft the administration's proposed fiscal year 2010 budget.

As you are likely aware, at the request of Senators Dorgan and Levin, the Government Accountability Office (GAO) in December released a report on "Large U.S. Corporations and Federal Contractors with Subsidiaries in Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions" (GAO-09-157). Incredibly, the report found that 83 of the 100 largest publicly traded U.S. corporations, based on 2007 revenue, reported having subsidiaries in tax havens or financial privacy jurisdictions, while 63 of the 100 largest U.S. federal contractors had subsidiaries in such locations, up from the GAO's 2004 findings on the matter (GAO-04-293). According to the GAO report, 4 of those 83 corporations had more than 100 subsidiaries in a tax haven or financial privacy jurisdiction, including one with 427 such subsidiaries.

Even more outrageous is the fact that a number of these firms are receiving funding through the Treasury Department's Troubled Asset Relief Program (TARP). For example, according to the report, Morgan Stanley has 158 subsidiaries in the Cayman Islands, while Citigroup has 90, and Bank of America has 59. Morgan Stanley has received $10 billion in taxpayer funds through TARP, while Citigroup and Bank of America have received $45 billion each. As we hope you agree, the fact that hard working American taxpayers who play by the rules are providing funds to companies using tax haven subsidiaries that may help them dodge payment of their fair share of taxes is simply unacceptable.

When questioned on offshore tax avoidance by Senate Budget Committee Chairman Kent Conrad during the confirmation process for your current position, you stated, "When some taxpayers do not comply with our tax laws, the burden of financing our government falls to those taxpayers who do. Reducing the tax gap would also help to reduce our budget deficits." With your former office, the Congressional Budget Office (CBO), estimating for 2009 an unprecedented deficit of $1.2 trillion, we believe it is more urgent then ever to reduce that tax gap.

We therefore strongly encourage you to craft a fiscal year 2010 budget that includes strong budget balancing proposals, including those that would reduce the tax gap. We suggest that those measures include provisions from the Stop Tax Haven Abuse Act, introduced in both the House and Senate, such as 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. This is but one of many areas in which our Tax Code needs improvement, and we do not intend to limit any of the many other changes you may have under consideration; however, this is one source of substantial revenue loss that we believe merits urgent attention.

We note that, when he was a Senator, President Obama was an original co-sponsor of this legislation (S.681, H.R.2136), calling it "a basic issue of fairness and integrity" and making clear that the U.S. Government must "crack down on individuals and businesses that abuse our tax laws so that those who work hard and play by the rules aren't disadvantaged." We whole-heartedly agree.

Thank you for your consideration, and we look forward to working with you on this critical issue.