By Richard Phillips, Citizens for Tax Justice; Matt Gardner, Institute on Taxation and Economic Policy; Kayla Kitson, Institute on Taxation and Economic Policy; Alexandria Robins, U.S. PIRG Education Fund; and Michelle Surka, U.S. PIRG Education Fund
U.S.-based multinational corporations are allowed to play by a different set of rules than small and domestic businesses or individuals when it comes to paying taxes. Corporate lobbyists and their congressional allies have riddled the U.S. tax code with loopholes and exceptions that enable tax attorneys and corporate accountants to book U.S. earned profits to subsidiaries located in offshore tax haven countries with minimal or no taxes. The most transparent and galling aspect of this is that often, a company’s operational presence in a tax haven may be nothing more than a mailbox. Overall, multinational corporations use tax havens to avoid an estimated $100 billion in federal income taxes each year.
But corporate tax avoidance is not inevitable. Congress could act tomorrow to shut down tax haven abuse by revoking laws that enable and incentivize the practice of shifting money into offshore tax havens. By failing to take action, the default is that our elected officials tacitly approve the fact that when corporations don’t pay what they owe, ordinary Americans inevitably must make up the difference. In other words, every dollar in taxes that corporations avoid must be balanced by higher taxes on individuals, cuts to public investments and services, and increased federal debt.
This study explores how in 2015 Fortune 500 companies used tax haven subsidiaries to avoid paying taxes on much of their income. It reveals that tax haven use is now standard practice among the Fortune 500 and that a handful of the country’s wealthiest corporations benefit the most from this tax avoidance scheme.
The main findings of this report are:
Most of America’s largest corporations maintain subsidiaries in offshore tax havens. At least 367 companies, or 73 percent of the Fortune 500, operate one or more subsidiaries in tax haven countries. All told, these 367 companies maintain at least 10,366 tax haven subsidiaries. The 30 companies with the most money officially booked offshore for tax purposes collectively operate 2,509 tax haven subsidiaries. The most popular tax haven among the Fortune 500 is the Netherlands, with more than half of the Fortune 500 reporting at least one subsidiary there.
Read the full report.