We are losing money because of loopholes which is legal. Why not let them bring the money back and pay the same taxes they are paying overseas.
This article was first published in June of 2014
More than 70 percent of Fortune 500 companies maintain subsidiaries in offshore tax havens, according to a new report by the U.S. Public Interest Research Group Education Fund and Citizens for Tax Justice.
The consumer groups say tax loopholes in the U.S. encourage the companies to use the tax havens. Together, the report says, the companies sent $2 trillion offshore for tax purposes in 2013.
Exploitation of the loopholes is perfectly legal. But it results in a giant loss of federal tax revenue each year, according to the report. Fifty-five companies disclose the amount they would expect to pay in U.S. taxes if they didn’t report profits offshore for tax purposes: a total of $147.5 billion, “equal to the entire state budgets of California, Virginia, and Indiana combined,” says the report. “The average tax rate the 55 companies currently pay to other countries on this income is a mere 6.7 percent, implying that most of it is booked to tax havens.”
The conservative Tax Foundation attacked the report saying that it cherry-picks a small sample of the Fortune 500 corporations, 55 of them, producing unreliable results. According to the Foundation, in general, corporations actually paid an effective rate of about 27 percent on their foreign income. A spokesman said the report provides “a misleading picture of the tax burden corporations pay overseas.”
Co-author of the report, Dan Smith of U.S. PIRG Education Fund, disagrees.
“Our tax code is broken, and it’s hurting the public. We simply shouldn’t allow companies that use American roads, and benefit from America’s education system and large consumer market, to take a free ride at the expense of the rest of us,” says Smith.
Findings in the report include:
Nike: $6.7 billion booked offshore, on which it would otherwise owe $2.2 billion in U.S. taxes. “That means they pay a mere 2.2 percent tax rate on those offshore profits, suggesting nearly all of the money is held by subsidiaries in tax havens,” reads the report.
Pfizer: $69 billion in profits booked offshore, the third highest among the Fortune 500. “The world’s largest drug maker, operates 128 subsidiaries in tax havens,” according to the report.
The Tax Foundation pointed out “almost every country on the planet is a tax haven compared to the United States.” According to the foundation’s review of IRS data, “U.S. multinationals paid $128 billion in foreign income taxes on $470 billion in reported taxable income in 2010. This is an effective tax rate of 27.2 percent.”
