Relating To Tax Haven Abuse.
If enacted, this bill would revise Chapter 235 of the Hawaii Revised Statutes to require corporations to report all profits, losses, revenues, and inter-company transactions. Specifically, it seeks to implement worldwide combined reporting, which is viewed as the gold standard for tax fairness and revenue generation. The revenues accrued from these changes would be allocated to the state general fund, hence supporting critical public services. Proponents argue that by ensuring corporations pay their fair share of taxes, the state can enhance its fiscal stability and funding for essential services.
House Bill 759 aims to address tax haven abuse by modifying corporate tax reporting requirements in the State of Hawaii. The bill proposes to enhance state revenue transparency by mandating that corporations include income from their foreign subsidiaries in their taxable income. This change is designed to close existing loopholes that allow corporations to significantly reduce their tax liability through complex schemes involving offshore tax havens. The impetus for this legislation stems from findings that indicate Hawaii is losing an estimated $38 million annually due to the absence of comprehensive corporate tax reporting laws.
Notably, the bill establishes a Corporate Tax Law Task Force within the Department of Taxation charged with reviewing Hawaii's corporate tax laws annually to recommend necessary updates. This task force's role is pivotal, as it would facilitate alignment with recent changes to federal tax laws while assessing what income generated by corporations can be taxed by the state, irrespective of their physical presence. Critics of the proposed changes might raise concerns about the financial burden on businesses, potentially arguing that it could deter investment or drive firms away from the state. However, supporters maintain that the overarching goal is to promote transparency and fairness in the state's tax system.