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Small business in Oregon would have to shoulder an extra $5,162.12 in taxes to make up for the revenue lost due to the abuse of offshore tax havens by multinational corporations, according to a new report by OSPIRG. As a new administration takes office and the possibility of tax reform again enters the national conversation, the report highlights how it’s small domestic businesses and ordinary Americans that have to shoulder the burden of multinational tax avoidance.
“The amount of cash corporations book to offshore tax havens is only growing, and it’s not because these corporations are actually conducting prolific amounts of business in the Cayman Islands,” said Charlie Fisher of OSPIRG. “Our tax code is balanced in favor of big multinational corporations, and that means here at home we’re losing out on lower individual tax rates, more funding for public programs, or decreasing our national debt.”
Every year, corporations and wealthy individuals avoid paying an estimated $147 billion in state and federal income taxes by using complicated accounting tricks to shift their profits to offshore tax havens.
The report found that the average Oregon small business would have to pay $5,162.12 to cover the cost of offshore tax dodging by large corporations. Offshore tax havens give large multinationals a competitive advantage over responsible small businesses which don’t have subsidiaries in tax havens to reduce their tax bills. Small businesses get stuck footing the bill for corporate tax dodging.
Many of America’s largest and best-known corporations use these complex tax avoidance schemes to shift their profits offshore and drastically shrink their tax bill. GE, Microsoft, and Pfizer boast the largest offshore cash hoards:
• General Electric maintained 20 tax haven subsidiaries and parked $104 billion offshore in 2015. With the help of offshore subsidiaries, General Electric paid a federal effective tax rate of -1.6% over the past ten years. GE’s tax rate was negative during that period because the company received net tax payments from the government.
• Microsoft reported a total of $124 billion in offshore profits. If this money had not been shifted offshore, Microsoft would have owed an additional $39.3 billion in taxes.
• Pfizer operates 181 subsidiaries in tax havens and holds $193.6 billion in profits offshore, the second highest among the Fortune 500. Pfizer recently attempted the acquisition of a smaller foreign competitor so it could reincorporate on paper as a “foreign company.” Pulling this off would have allowed the company a tax-free way to avoid $40 billion in taxes on its offshore earnings, but fortunately the Treasury Department issued new anti-inversion regulations that stopped the deal from taking place.
“With tax reform likely on the table for the new administration, it’s vital that all decision makers take into account the realities of how tax haven abuse hurts small businesses here in Oregon,” said Fisher. “Any tax reforms should slam the door shut on the flow of corporate cash into tax haven countries, not open those flood gates more widely.”
The report recommends closing a number of loopholes, including ending deferral, which allows corporations to defer paying taxes on profits booked offshore until they are brought back to the U.S.
Click here for a copy of “Picking Up the Tab: Average Citizens and Small Businesses Pay the Price for Offshore Tax Havens”
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