Study: 70% of Fortune 500 Companies Used Tax Havens in 2013

30 companies booked more cash offshore than others combined

ConnPIRG Education Fund

 
Tax loopholes encouraged more than 70 percent of Fortune 500 companies – including General Electric, United Technologies and Priceline.com in Connecticut – to maintain subsidiaries in offshore tax havens as of 2013, according to “Offshore Shell Games,” released today by ConnPIRG Education Fund and Citizens for Tax Justice. Collectively, the companies reported booking nearly $2 trillion offshore for tax purposes, with just 30 companies accounting for 62 percent of the total, or $1.2 trillion.

“Our tax code is broken, and it’s hurting the public,” said Abe Scarr, Director of the ConnPIRG Education Fund. “We’ve made it too easy for American multinationals to dodge taxes by setting up shell companies in tax havens, it hurts all Connecticut taxpayers. We simply shouldn’t allow companies that use Connecticut roads, and benefit from our education system and large consumer market, to take a free ride at the expense of the rest of us.”

“The loopholes in America’s corporate tax have grown so outrageous that our policymakers should be embarrassed,” said Steve Wamhoff, CTJ legislative director. “The data in this report demonstrate that a huge portion of the supposedly ‘offshore’ profits are likely to be U.S. profits that are manipulated so that they appear to be earned in countries like Bermuda or the Cayman Islands where they won’t be taxed. Policymakers should close the loopholes that make this manipulation possible.”

Every year, offshore tax loopholes used by U.S. corporations cost Connecticut $600 million in state tax revenue.

ConnPIRG Education Fund’s new study shows that while most very large companies use tax havens, a smaller subset are most aggressive about using offshore tax havens to avoid taxes.

Key findings of the report include:

–    At least 362 Fortune 500 companies operate subsidiaries in tax haven jurisdictions, as of 2013. All told, these companies maintain at least 7,827 tax haven subsidiaries. The 30 companies with the most money booked offshore for tax purposes collectively operate 1,357 tax haven subsidiaries.
–    Approximately 64 percent of the companies with any tax haven subsidiaries registered at least one in Bermuda or the Cayman Islands. The profits that American multinationals collectively claim to earn in these island nations’ totals 1,643 percent and 1,600 percent, respectively of each country’s entire yearly economic output.
–    The 30 companies with the most money booked offshore for tax purposes collectively hold nearly $1.2 trillion overseas. That is 62 percent of the nearly $2 trillion that Fortune 500 companies together report holding offshore.
–    Only 55 companies disclose the amount they would expect to pay in U.S. taxes if they didn’t report profits offshore for tax purposes. All told, these 55 companies would collectively owe $147.5 billion in additional federal taxes, equal to the entire state budgets of California, Virginia, and Indiana combined. The average tax rate the 55 companies currently pay to other countries on this income is a mere 6.7 percent, implying that most of it is booked to tax havens.

Companies headquartered in Connecticut that were highlighted by the study include:

•    General Electric: GE comes in a close second place for having booked the most profits offshore. The company has 18 subsidiaries in offshore tax havens, including three in Bermuda and one in the Bahamas. The industrial giant has so deftly exploited offshore loopholes, and other tax breaks that  between 2008 and 2012, despite earning $27.5 billion in profits over those years they paid no federal income taxes. What GE does spend big bucks on is lobbying to protect its tax breaks. GE hired 48 lobbyists – more than any other company – to protect a tax break that helps the company shift billions in profits offshore.
•    United Technologies: United Technologies maintains 27 subsidiaries in offshore tax havens including one in the Cayman Islands and two in Luxembourg. The company reports having $25 billion booked offshore for tax purposes but does not disclose its estimated tax bill on those profits were they not booked offshore.
•    Priceline.com: Priceline reports holding $4.9 billion in profits offshore for tax purposes and maintains three subsidiaries in tax havens like Mauritius. It does not disclose its estimated tax bill on those profits were they not booked offshore. By exploiting offshore loopholes and other tax breaks, Priceline managed to pay no federal income taxes between 2008 and 2012 on its $557 million in profits.
•    Xerox: The copy maker maintains 52 subsidiaries in offshore tax havens, including four in Barbados and eight in Bermuda. The company reports having $8 billion booked offshore but does not disclose its estimated tax bill on those profits were they not booked offshore.

The report concludes that to end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore loopholes, strengthen tax enforcement, and increase transparency.