2 years ago
Senate Finance Committee Chair Ron Wyden wants to strip tax credits from U.S. companies tied to Russia and Belarus as part of an expanding economic clampdown following the invasion of Ukraine.
His plan would effectively raise U.S. taxes on companies that do business in those two countries and claim credits here for taxes paid there.
“If U.S. companies choose to keep paying taxes to Russia — taxes that are funding the bombing of hospitals for women and children — they should do it without a penny of help from American taxpayers,” Wyden (D-Ore.) said.
Since the invasion, U.S. companies ranging from McDonald’s to Goldman Sachs have either pulled out of Russia or suspended operations there. But some others are still doing business in the country, according to a running list compiled by a research team led by Yale University professor Jeffrey Sonnenfeld.
Wyden would also target some citizens of Russia and Belarus who currently get tax breaks stateside.
The twin moves would complement a range of economic measures already taken by the U.S. and other allied nations, particularly against Russia, including sanctions and other trade actions like banning purchases of Russian oil.
“We need a comprehensive response that turns up the financial pressure from every angle,” said Wyden, who’s been focusing for weeks on ways to play a part in the broader economic assault on Russia and its allies.
The two ideas follow Wyden’s previous announcement that his committee would investigate loopholes in U.S. tax law that Russian oligarchs exploit to hide high-dollar assets in the U.S.
Punishing companies: Wyden wants to take away tax breaks from U.S. companies that make money in Russia and Belarus.
Specifically, his plan would ditch the preferential 10.5 percent tax rate on foreign earnings defined as global intangible low-taxed income, or GILTI, as well as a foreign tax credit that offsets U.S. taxes dollar-for-dollar.
The idea has precedent — U.S. companies are already denied those tax breaks on income they make in four countries supporting terrorism or without diplomatic relations with the U.S.: Iran, North Korea, Syria and Sudan.
If Russia, Belarus and countries participating in or supporting the invasion of Ukraine were added to the list, it would take six months for the tax sanctions to take effect under current law, but Wyden wants to shorten the timeline.
Targeting individuals: For Russians and Belarusians who make income in the U.S., Wyden wants to scrap preferential tax treatment they receive on their American earnings.
For example, he’d eliminate reduced withholding tax rates on dividend and interest payments for individuals and entities already identified by the Office of Financial Assets Control, a Treasury Department division that enforces sanctions.
Under normal circumstances, foreigners get these breaks through tax treaties, but ditching them in certain cases would subject select recipients to the full U.S. tax on the income — typically a 30 percent withholding tax on payments.
The proposal also would let Treasury expand the tax penalties to more individuals and entities, including the governments of Russia and Belarus.
“We should take away every special tax benefit for all sanctioned individuals, as well as give [Treasury] Secretary [Janet] Yellen the authority to identify other individuals, companies, or governments supporting the invasion that should lose their tax goodies,” Wyden said.
The Finance Committee will continue developing these and other proposals to hold Russia accountable, he said.
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