Corporations Dodging Taxes Version 125.0

In General Interest by Jonathan Tasini0 Comments

This one slipped by me a couple of days ago. In case you thought that this problem was going away — but you are too smart to believe that — big corporations are still fleecing the country.

So, says a report from the Congressional Research Service, which doesn’t publish its reports (!!!) so we have to turn to Citizens for Tax Justice for the scoop:

A new report from the non-partisan Congressional Research Service (CRS) finds that U.S. corporations report a huge share of their profits as officially earned in small, low-tax countries where they have very little investment and workforce while reporting a much smaller percentage of their profits in larger, industrial countries where they actually have massive investments and workforces.[1] The report confirms that U.S. corporations are artificially inflating the proportion of their global profits that are generated in small, low-tax countries — in other words, shifting their profits to tax havens.

CRS looked at the location of foreign profits, as reported by U.S.-based multinationals in surveys conducted by the Commerce Department’s Bureau of Economic Analysis. CRS’s report focused on five small countries generally considered to be tax havens (the Netherlands, Luxembourg, Ireland, Bermuda and Switzerland) and compared them to five of the top “traditional” foreign countries where American companies actually do business (Canada, Germany, the United Kingdom, Australia and Mexico). The results are striking.

Comparing reported profits to workforce and investments, CRS finds:

■ In 2008, American multinational companies reported earning 43 percent of their $940 billion in overseas profits in the five little tax-haven countries, even though only four percent of their foreign workforce and seven percent of their foreign investments were in these countries.

■ In contrast, the five “traditional economies,” where American companies had 40 percent of their foreign workers and 34 percent of their foreign investments, accounted for only 14 percent of American multinationals’ reported overseas’ profits.

When comparing reported profits to countries’ total economic output (gross domestic product), what CRS finds is even more alarming:

■ U.S. multinational profits in the five traditional economies averaged one to two percent of those countries’ total economic output. But the multinationals’ reported profits in the five tax-haven countries averaged 33 percent of those tax havens countries’ economies.

■ More specifically, U.S. multinational foreign profits reported in Bermuda equaled a ridiculous 1000 percent of that tiny island’s total economic output. That was up by a factor of five since 1999.

■ In even tinier Luxembourg, American business profits jumped from 19 percent of that country’s economy in 1999 to 208 percent the economy by 2008.

You know, these guys aren’t fools. They already have their paid-for lobbyists (also known as “Members of Congress”) who have, in the past, pushed for a “tax holiday” on repatriated profits from overseas (see more explanation of that scam here). So, if I’m the finance guy, I say to my CEO, “let’s move more of the profits overseas and, eventually, we can bring it back on the cheap”. Brilliant.

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