Offshore Tax Havens Cost Average Arizona Taxpayer $803 This Year

Arizona PIRG

As Tax Day approaches, a new study from the Arizona Public Interest Research Group, Picking up the Tab: Average Citizens and Small Businesses Pay the Price for Offshore Tax Havens, revealed that the average Arizona taxpayer in 2012 would have to shoulder an extra $803 in taxes to make up for the revenue lost due to the use of offshore tax havens by corporations and wealthy individuals.

“Tax dodging is not a victimless offense. When companies use accounting gimmicks to move their profits to tax haven shell companies, the rest of us have to pick up the tab,” said Serena Unrein, Public Interest Advocate for Arizona PIRG. “With the nation facing such serious budget challenges, it’s a no-brainer that we need to close these loopholes and stop letting large corporations avoid paying what they should.”

The report additionally found that the average Arizona small business would have to pay $2,543 this year to cover the cost of offshore tax dodging by large corporations.

Every year, corporations and wealthy individuals avoid paying an estimated $150 billion in federal taxes by using complicated accounting tricks to shift their profits to offshore tax havens. Of that $150 billion, $90 billion is avoided specifically by corporations.

The federal revenue lost to offshore tax havens would be more than enough to cover the automatic federal budget cuts caused by the sequester. Another recent Arizona PIRG Education Fund report also found that offshore tax dodging costs Arizona $503 million in 2012.

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:

• Pfizer, the world’s largest drug maker, made 40 percent of its sales in the U.S. over the past five years, but thanks to their use of offshore tax loopholes they reported no taxable income in the U.S. during that time. The company operates 172 subsidiaries in tax havens and has $73 billion parked offshore which remains untaxed by the U.S., according to its own SEC filing. That is the second highest amount of money sitting offshore for one U.S. multinational corporation.
• Microsoft avoided $4.5 billion in federal income taxes over a three year period by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. Microsoft maintains five tax haven subsidiaries and keeps 70 percent of its cash offshore, a total of $60.8 billion, on which it would otherwise owe $19.4 billion in U.S. taxes.
• Citigroup – a bank that was bailed out by taxpayers during the financial meltdown of 2008 – maintains 20 subsidiaries in tax havens and has $42.6 billion sitting offshore, on which it would otherwise owe $$11.5 billion in taxes, according to its own SEC filing. Citigroup currently ranks eighth among U.S. multinationals for having the most money stashed offshore.

“It is inexcusable that these companies get out of paying for the nation’s infrastructure, education system, and security that help make them successful,” stated Unrein.

The report recommends closing a number of offshore tax loopholes. Many of these reforms are included in the Cut Unjustified Tax Loopholes Act (U.S. Senate Bill 268).

Click here for a copy of Picking up the Tab: Average Citizens and Small Businesses Pay the Price for Offshore Tax Havens.

Click here to see an earlier study from the Arizona PIRG Education Fund report showing how offshore tax dodging harms Arizona’s budget.

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