Proposal would stop corporations from shifting income to low-tax foreign countries
Saint Paul, MINN. – As Minnesotans file tax returns today, a bill authored by State Representative Frank Hornstein (DFL – Minneapolis) closes a loophole used by some Minnesota corporations to avoid paying taxes. The legislation (HF 3898) would stop Minnesota corporations from shifting profits to subsidiaries in foreign countries in an effort to avoid paying taxes and expand the definition of domestic corporations to include tax haven corporations in 46 countries or territories around the globe.
“The release of the ‘Panama Papers’ has triggered global interest in how wealth is being shifted to avoid paying taxes and further enrich the wealthy few,” said Rep. Hornstein. “This legislation will ensure that any Minnesota corporation with property, payroll, and sales here is paying Minnesota corporate taxes, even if they have subsidiaries in these 46 countries or territories to which they’re shifting revenue.”
The Organization of Economic Co-operation and Development and the U.S. Senate estimate revenue losses from tax evasion by U.S.-based firms and individuals at around 100 billion dollars a year. Minnesota House Research analysis from 2010 estimated that Minnesota was losing $12 to $14 million per year as a result of artificial income shifting to overseas corporations.
“Shifting money around like this means fewer resources for critical state needs,” said Rep. Hornstein. “We need to call out companies that are moving money abroad simply to avoid tax payments and ask them if they think we should have good schools, healthcare, and infrastructure, or if lowering standards of living in Minnesota is their intended goal.”
The 46 tax havens designated in the bill include: Andorra, Anguilla, Antigua and Barbuda, Aruba, Bahamas, Bahrain, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Cook Islands, Curacao, Cyprus, Dominica, Gibraltar, Grenada, Guatemala, Guernsey-Sark-Alderney, Isle of Man, Jersey, Liberia, Liechtenstein, Luxembourg, Malta, Marshall Islands, Mauritius, Monaco, Montserrat, Nauru, Niue, Panama, St. Kitts and Nevis, St. Lucia, St. Vincent and Grenadines, Saba, Samoa, San Marino, Seychelles, Sint Eustatius, Sint Maarten, Trinidad and Tobago, Turks and Caicos, United States Virgin Islands, and Vanuatu.
Rep. Hornstein encourages community members to contact him on any legislative issue. He can be reached by email at rep.frank.hornstein@house.mn or telephone at 651-296-9281.
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