Big U.S. firms stash $2.1-trillion overseas to avoid taxes
A recently released report by advocacy group Citizens for Tax Justice has revealed the staggering amount of money being held in offshore accounts by U.S. technology firms. Their filings indicated they were paying about 6 percent in taxes overseas, compared to a 35 percent US corporate tax rate, it said. As a result, it paid a tax of 3.1 percent on its $108.3 billion in profit.
Finance Minister Bob Richards has addressed the “tax haven” accusation on multiple occasions, once saying: “If there are problems with the United Kingdom, the USA or anybody in Europe collecting their taxes, it’s because their system is deficient, not because we’ve done something wrong”. Instead, because Apple has structured its two Irish subsidiaries as tax residents of neither the U.S., nor Ireland, it is able to avoid paying tax to either government on the majority of its profits.
“The automatic exchange of information on tax rulings will enable member states to detect certain abusive tax practices by companies and take the necessary action in response”, the European Commission announced in a press statement. According to a 2013 report from the Wall Street Journal, 93 percent of Microsoft’s foreign profits were invested in USA government bonds, corporate bonds and mortgage securities.
Apple was holding $181.1bn offshore, more than any other company, and would owe an estimated $59.2bn in U.S. taxes if it brought the money home.
“At least 358 companies, almost 72 percent of the Fortune 500, operate subsidiaries in tax haven jurisdictions as of the end of 2014”, the report states. The report finds 60% of companies with tax subsidiaries had at least one in either country, though the Netherlands had the highest number of subsidiaries. The profits that American multinationals collectively claim to earn in these island nations’ totals 1,643 percent and 1,600 percent, respectively, of each country’s entire yearly economic output.
“This study examines the use of tax havens by Fortune 500 companies in 2014”.
That’s because USA companies are saving a few $620 billion by parking profits outside the country, according to the latest accounting from Citizens for Tax Justice and U.S. PIRG Education Fund. All told, these 56 companies would collectively owe $170 billion in additional federal taxes.