Tag Archives: tax havens

Study: 73 percent of Fortune 500 companies playing offshore shell game

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.

Economists unite: Tax havens serve no useful economic purpose

We urge you to use this month’s anti-corruption summit in London to make significant moves towards ending the era of tax havens.

The existence of tax havens does not add to overall global wealth or well-being; they serve no useful economic purpose. Whilst these jurisdictions undoubtedly benefit some rich individuals and multinational corporations, this benefit is at the expense of others, and they therefore serve to increase inequality.

As the Panama Papers and other recent exposés have revealed, the secrecy provided by tax havens fuels corruption and undermines countries’ ability to collect their fair share of taxes. While all countries are hit by tax dodging, poor countries are proportionately the biggest losers, missing out on at least $170 billion of taxes annually as a result.

As economists, we have very different views on the desirable levels of taxation, be they direct or indirect, personal or corporate. But we are agreed that territories allowing assets to be hidden in shell companies or which encourage profits to be booked by companies that do no business there, are distorting the working of the global economy. By hiding illicit activities and allowing rich individuals and multinational corporations to operate by different rules, they also threaten the rule of law that is a vital ingredient for economic success.

To lift the veil of secrecy surrounding tax havens we need new global agreements on issues such as public country by country reporting, including for tax havens. Governments must also put their own houses in order by ensuring that all the territories, for which they are responsible, make publicly available information about the real “beneficial” owners of company and trusts. The UK, as host for this summit and as a country that has sovereignty over around a third of the world’s tax havens, is uniquely placed to take a lead.

Taking on the tax havens will not be easy; there are powerful vested interests that benefit from the status quo. But it was Adam Smith who said that the rich “should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.” There is no economic justification for allowing the continuation of tax havens which turn that statement on its head.

CASE STUDY: MALAWI

Tax revenue that should be helping to fund public services like healthcare and education in Malawi and other poor countries is disappearing at an alarming rate. It’s estimated that Africa loses around $14 billion in tax revenues annually – enough money to pay for healthcare for mothers and children that could save four million children’s lives a year and employ enough teachers to get every African child into school.
In Malawi, it’s impossible to get a full picture of the scale of tax dodging. However, Oxfam calculated that the lost tax revenue from the money revealed to be held by Malawians in HSBC accounts in Geneva in last year’s Swissleaks scandal could pay the salaries of 800 nurses for one year.

Half of Malawi’s 16 million people live in poverty. The health system is seriously under-resourced with shortages of staff and vital medicines. On average there are just three nurses for every 10,000 people. Public spending per primary-school child is among the world’s lowest. Recent cuts to government budgets are making the situation even worse for the poorest who have no way to pay for private clinics and schools.

A link to the signatories …