Offshore Shell Games 2014 – The Use of Offshore Tax Havens by Fortune 500 Companies

Source: Richard Phillips, Steve Wamhoff, Dan Smith, Citizens for Tax Justice and U.S. PIRG Education Fund, June 2014

From the summary:
Many large U.S.-based multinational cor­porations avoid paying U.S. taxes by using accounting tricks to make profits made in America appear to be generated in offshore tax havens—countries with minimal or no taxes. By booking profits to subsidiaries registered in tax havens, multinational corporations are able to avoid an estimated $90 billion in fed­eral income taxes each year. These subsidiaries are often shell companies with few, if any em­ployees, and which engage in little to no real business activity.

Congress has left loopholes in our tax code that allow this tax avoidance, which forces ordinary Americans to make up the difference. Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.

This study examines the use of tax havens by Fortune 500 companies in 2013. It reveals that tax haven use is ubiquitous among America’s largest companies, but a narrow set of compa­nies benefit disproportionately.

∙ Most of America’s largest corporations maintain subsidiaries in offshore tax ha­vens. At least 362 companies, making up 72 percent of the Fortune 500, operate subsid­iaries in tax haven jurisdictions as of 2013….

∙ Approximately 64 percent of the companies with any tax haven subsidiaries registered at least one in Bermuda or the Cayman Islands—two notorious tax havens. Fur­thermore, the profits that all American multi­nationals—not just Fortune 500 companies—collectively claim were earned in these island nations in 2010 totaled 1,643 percent and 1,600 percent of each country’s entire yearly economic output, respectively.

∙ Six percent of Fortune 500 companies ac­count for over 60 percent of the profits re­ported offshore for tax purposes. These 30 companies with the most money offshore—out of the 287 that report offshore profits—collectively book $1.2 trillion overseas for tax purposes.

∙ Only 55 Fortune 500 companies disclose what they would expect to pay in U.S. taxes if these profits were not officially booked offshore. All told, these 55 companies would collectively owe $147.5 billion in ad­ditional federal taxes. To put this enormous sum in context, it represents more than the en­tire state budgets of California, Virginia, and Indiana combined….