IN a bid to limit tax avoidance and boost tax revenue, legislation was introduced in the US House, on Monday, which is designed to bring about financial transparency and sound the death knell of offshore tax havens.

Representative Lloyd Doggett introduced three pieces of legislation on April 15, coinciding with Tax Day, including the Stop Tax Haven Abuse Act, International Tax Competitiveness Act, and Fairness in International Taxation Act.

The Stop Tax Haven Abuse Act is aimed to close tax loopholes by deterring the use of tax havens for tax evasion. The bill requires companies registered with the Securities and Exchange Commission (SEC) to annually report its sales and profits, as well as the number of employees, besides financing, tax obligations and corporate tax payments, in each jurisdiction where the company operates, thereby forcing corporates to disclose their offshore holdings.

For instance, a study had reported that 25 major US corporations paid more compensation to their CEOs than they paid in federal taxes. Also, five of these corporations had a total of 267 subsidiaries registered in tax havens.

Such mandatory reporting would shed light on the extent of use of tax havens and be critical in curbing illicit financial flows. The Stop Tax Haven Abuse bill also provides penalties for failure in making these disclosures. The Stop Tax Haven Abuse Act thus aims to close several different loopholes by deterring the use of tax havens for tax evasion and strengthening the enforcement of tax laws.

Additionally, the bill would require financial institutions to report to the Internal Revenue Service (IRS) bank accounts opened by offshore entities controlled by US corporations and would require reporting to Congress, information related to tax exempt status provided by the IRS. In all, the bill would provide far more transparency than is currently required on the offshore activities of corporations besides ending a number of offshore tax breaks for corporations and encourage greater financial transparency.

Two other legislations introduced by Doggett were the International Tax Competitiveness Act, which addresses a large and growing area of tax abuse: the practice of developing a trademark, patent, or copyright in the US and then transferring that intellectual property abroad to avoid taxes on the vast income it generates. The bill would treat income from the US intellectual property as US income and tax it accordingly.

The US research and advocacy group, Global Financial Integrity, praised the legislation for its impact on developing nations, which lose an estimated US $1 trillion per year in illicit outflows of money due to tax haven secrecy. Adopting the Stop Tax Haven Abuse Act would be a major victory for US, European, and developing country taxpayers,” said GFI director Raymond Baker in a statement.