Citizens for Tax Justice (CTJ) published a report earlier this week entitled “Dozens of Companies Admit Using Tax Havens: Hundreds More Likely Do the Same, Avoiding $550 Billion in Taxes” that highlighted how 301 American Fortune 500 corporations are holding more than $2 trillion offshore and avoid paying about $550 billion in United States taxes.
The report assessed filings companies made in 2013 with the Securities and Exchange Commission (SEC) and it found that 28 corporations paid an income tax rate of 10 percent or less to governments where profits are held. Analysts say that this is likely evidence that the profits offshore are actually tax havens.
A majority of the disclosed corporations have listed their income as “permanently reinvested” offshore profits, which totaled $1.95 trillion, but most of the 301 companies declined to list the tax rate they would have paid in the U.S. if these profits were repatriated.
The organization is urging Washington to act quickly because a growing number of these companies are increasing their declared offshore funds, including Cisco, Google, IBM, Microsoft and Apple. The group also argues that these corporations are working actively to permanently shelter their offshore cash from the U.S. government.
“A far more sensible solution would be to simply end ‘deferral,’ that is, repealing the rule that indefinitely exempts offshore profits from U.S. income tax until these profits are repatriated,” the CTJ stated in the report.
“Ending deferral would mean that all profits of U.S. corporations, whether they are generated in the U.S. or abroad, would be taxed by the United States in the year they are earned. Of course, American corporations would continue to receive a ‘foreign tax credit’ against any taxes they pay to foreign governments, to ensure profits are not double-taxed.”
Essentially, these corporations are utilizing the tax loopholes imposed by the U.S. government.
Many companies are relocating their operations, moving their businesses overseas and setting up offshore to save money and avoid the massive taxes imposed by Uncle Sam. This has been a common trait since the 1990s, a time when Independent presidential candidate Ross Perot called it a “giant sucking sound.”
Credit Suisse, Eric Holder
Credit Suisse pleaded guilty Monday to pay a $2.6 billion fine after it was accused of helping wealthy Americans avoid paying taxes and sheltering their incomes from the Internal Revenue Service (IRS) by hiding their wealth in secret offshore bank accounts. The second-largest financial institution in Switzerland was part of the one-year investigation.
The case was deemed as part of the Obama administration’s efforts to crack down on foreign banks aiding U.S. taxpayers concealing their assets. The Justice Department stated that it is attempting to hold banks, their employees and U.S. clients accountable for their illegal actions.
Attorney General Eric Holder was blunt earlier this month in a message to the finance industry that no bank “is too big to jail.”
“Some have used that phrase to describe the theory that certain financial institutions, even if they engage in criminal misconduct, should be considered immune from prosecution due to their sheer size and their influence on the economy,” Holder said during a weekly video message posted on the Justice Department website.
“That view is mistaken. And it is a view that has been rejected by the Department of Justice. To be clear: No individual or company, no matter how large or how profitable, is above the law. When the Department of Justice conducts investigations, we will always follow the law and the facts wherever they lead.”