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Do Corporate Tax Havens Create Tax Hells for the Rest of Us?

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In a recent article published by Accounting Today I read that, “Nearly three-quarters of Fortune 500 companies booked their profits to tax havens last year.” As a tax attorney working with people who find themselves unable to pay their taxes due to a variety of unexpected and often unavoidable hardships, this kind of news piques my interest, and not necessarily in the most positive way.

The article was based on a recent report called “Offshore Shell Games,” released on October 6th by the U.S. Public Interest Research Group  (PIRG) Education Fund and Citizens for Tax Justice.

One of the program associates, Michelle Surka was quoted in the article saying, “When corporations dodge their taxes, the public ends up paying.” She continued with a fact that I wholeheartedly agree with, adding, “The American multinationals that take advantage of tax havens use our roads, benefit from our education system and large consumer market, and enjoy the security we have here, but are ultimately taking a free ride at the expense of other taxpayers.”

Hard working, responsible American citizens are held accountable for paying taxes when they are barely scraping by. They often lose their homes, their businesses, their families and their health, not to mention their dignity.

While knowing so many taxpaying citizens are trying to keep their noses above water, it’s a little more than frustrating to read in the article, “Many of the corporations report fewer offshore subsidiaries than they have disclosed in previous years, all while actually holding more money offshore than in the past. Some corporations are likely failing to disclose substantial numbers for all of their subsidiaries, while others are likely holding more money in fewer subsidiaries. Bank of America, for example, reported having 264 subsidiaries in 2013. In 2014, the bank reported just 22 subsidiaries, but had actually increased its offshore holdings by $200 million.”

As if that were not bad enough the article exposes the 30 companies with “the most money booked offshore for tax purposes.” According to the article, they “collectively hold nearly $1.4 trillion overseas. That is 65 percent of the more than $2.1 trillion that Fortune 500 companies together report holding offshore.”

Of the Fortune 500 companies, states the article, “only 57 disclose the amount they would expect to pay in U.S. taxes if they didn’t report profits offshore for tax purposes. All told, these 57 companies would collectively owe $184.4 billion in additional federal taxes, equal to the entire state budgets of California, Virginia, and Indiana combined.” 

I’m not surprised, nor should you be to read that, “All too often, corporations’ offshore cash isn’t offshore at all—it’s right here in the United States,” according to Robert McIntyre, director of Citizens for Tax Justice. He adds, “Corporations are using skilled tax attorneys to make it appear on paper that their U.S. profits, and their U.S.-based cash, are being earned, and kept, in foreign tax havens. The tax code makes this scam possible. Incredibly, Congress is considering pouring salt on the wound by giving companies a special low tax rate to ‘repatriate’ profits that, in many cases, are likely already here.”  Of course, that salt will be poured on the wound of the taxpaying American citizen.

While the answer to the question the title of my article poses is not definitive, of one thing I am sure. These corporations do provide jobs for many Americans. But those people working for the multinational corporations who are taking advantage of tax havens are paying their due taxes and do not have the benefit of tax loopholes and offshore shell games to shelter them from paying for the roads and schools and privileges that are enjoyed on a daily basis by the families of the heads of the corporations that are evading their civic responsibilities.

I was very happy to read that in the final analysis, “The study’s authors believe that to end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore tax breaks, strengthen tax enforcement and increase transparency.” I couldn’t agree more.

 

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