More than 73 percent of Fortune 500 companies maintained subsidiaries in offshore tax havens in 2015, according to “Offshore Shell Games.”
The new study was released this week by the U.S. PIRG Education Fund, Citizens for Tax Justice and the Institute on Taxation and Economic Policy.
Collectively, multinationals reported booking $2.5 trillion offshore, with just 30 companies accounting for 66 percent of this total.
By indefinitely stashing profits in offshore tax havens, corporations are avoiding up to $717.8 billion in U.S. taxes.
“Corporate tax dodging may be legal, but it’s certainly not good for everyday taxpayers and responsible small businesses,” Michelle Surka, advocate with U.S. Public Interest Research Group, said in a news release. “It disadvantages small businesses that don’t have scores of tax lawyers, creates an economic environment that favors accounting tricks over innovation and real productivity, and forces the rest of us to foot the bill. We’re beginning to see a growing international interest in cracking down on corporate tax dodging, and with $717.8 billion on the line, it’s time for the United States to start doing the same.”
“Every year, corporations collectively report that they have tens of billion more in cash stashed offshore than they did the year before, “ added Matthew Gardner of the Institute on Taxation and Economic Policy. “The hard fact is that the U.S. tax code incentivizes tax haven abuse by allowing companies to indefinitely defer taxes on offshore profits until they are ‘repatriated.’ The only way to end this kind of tax avoidance is by closing the loopholes in the tax code that enable it.”
Key findings of the report:
• 367 Fortune 500 companies collectively maintain 10,366 tax haven subsidiaries. The 30 companies with the most money booked offshore for tax purposes collectively operate 2,509 tax haven subsidiaries.
• 58 percent of companies with any tax haven subsidiaries registered at least one in Bermuda or the Cayman Islands, countries with no corporate tax. The profits that American multinationals collectively claim to earn in these island nations totals 1,884 percent and 1,313 percent, respectively of each country’s entire yearly economic output, an impossible feat.
• The 30 companies with the most money booked offshore for tax purposes collectively hold nearly $1.65 trillion overseas. That is 66 percent of the nearly $2.5 trillion that Fortune 500 companies together report holding offshore.
• Only 58 Fortune 500 companies disclose what they would expect to pay in U.S. taxes if these profits were not officially booked offshore.In total, these 58 companies would owe $212 billion in additional federal taxes, equal to the entire state budgets of California, Virginia and Indiana combined. The average tax rate the 58 companies currently pay to other countries on this income is a mere 6.2 percent, implying that most of it is booked to tax havens.
The study highlights the following companies:
• Apple: Apple has booked $214.9 billion offshore — more than any other company. It would owe $65.4 billion in U.S. taxes if these profits were not officially held offshore for tax purposes. A recent ruling by the European Commission found that Apple used a tax haven structure in Ireland to pay a rate of just 0.005 percent on its European profits in 2014, and has required that the company pay $14.5 billion in back taxes to Ireland, where the company was paying significantly less than even the tax haven’s standard low tax rate. A U.S. Senate investigation in 2013 uncovered Apple’s two Irish subsidiaries that were tax residents of neither the United States, where they are managed and controlled, nor Ireland, where they are incorporated.
• Nike: The sneaker giant officially holds $10.7 billion offshore for tax purposes on which it would owe $3.6 billion in U.S. taxes. This implies Nike pays a mere 1.4 percent tax rate to foreign governments on those offshore profits, indicating that nearly all of the money is officially held by subsidiaries in tax havens. The shoe company, which operates 931 retail stores throughout the world, does not operate one in Bermuda.
• Goldman Sachs: Goldman Sachs reports having987 subsidiaries in offshore tax havens, 537 of which are in Bermuda despite not operating a single legitimate office in that country, according to its own website. The bank officially holds $28.6 billion offshore.
The report concludes that to end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore loopholes, strengthen tax enforcement and increase transparency.