New Study: 82 of Top 100 Companies Used Tax Havens in 2012

Companies Hold $1.2 Trillion Offshore, Untaxed by U.S.

ConnPIRG

With Congress considering big cuts to public programs, ConnPIRG released fresh evidence that the vast majority of large companies are dodging taxes by stashing money in offshore tax havens. In a study of the top 100 publicly traded companies, as measured by revenue, the study reveals that 82 maintain subsidiaries in offshore tax havens. Collectively, the companies report holding nearly $1.2 trillion offshore, with 15 companies accounting for two-thirds of the offshore cash.

“When corporations use tax havens to dodge the taxes they owe, the rest of us pay the price, either through higher taxes, cuts to important programs, or a bigger deficit,” said Abe Scarr, ConnPIRG Director. “It also puts small businesses without expensive tax attorneys at a big competitive disadvantage. It’s time for Congress to put an end to offshore tax dodging,” he added.

Every year, U.S. corporations avoid paying an estimated $90 billion in federal taxes by stashing profits in offshore tax havens. U.S. PIRG’s new study shows that while most large companies use tax havens, the benefits of offshore tax loopholes are especially concentrated among a narrow set of companies.

Pfizer, the world’s largest drug maker, is based in New York City with its research center in Groton Connecticut.  Pfizer operates 174 subsidiaries in tax havens and currently books $73 billion in profits offshore. The company made more than 40 percent of its sales in the U.S. between 2010 and 2012, but managed to report no federal taxable income in the U.S. for the past five years. This is because Pfizer uses accounting gimmicks to shift the location of its taxable profits offshore.  Pfizer has the third highest amount of money sitting offshore among U.S. multinational corporations. 

Connecticut based General Electric has $108 Billion held offshore, more than any other company, including Apple, the subject of a recent senate investigation over its large offshore holdings. Connecticut companies United Technologies and Aetna are also listed in the report as among the top 100 publicly traded companies using offshore tax havens.

Key findings of the report include: 

• 82 of the top 100 publicly traded U.S. companies operate subsidiaries in tax haven jurisdictions, as of 2012. All told, these 82 companies maintain 2,686 tax haven subsidiaries. The 15 companies with the most money held offshore collectively operate 1,897 tax haven subsidiaries. 
• The 15 companies with the most money offshore hold a combined $776 billion overseas. That is 66 percent of the nearly $1.2 trillion that the top 100 companies report holding offshore.
• Only 21 of the top 100 publicly traded companies disclose the amount they would expect to pay in U.S. taxes if they didn’t keep profits offshore. All told, these 21 companies would collectively owe more than $93 billion in additional federal taxes, which close to the entire state budget of California. The average tax rate the 21 companies currently pay to other countries on this income is a mere 6.9 percent.

Companies highlighted by the study include:

• Bank of America: The bank reports having 316 subsidiaries in offshore tax havens – more than any other company. The bank, which was kept afloat by taxpayers during the 2008 financial meltdown, now keeps $17.2 billion offshore, on which it would otherwise owe $4.5 billion in U.S. taxes.
• Oracle: The tech giant reports having $20.9 billion stored offshore and maintaining five subsidiaries in offshore tax havens. The company disclosed that it would owe $7.3 billion in U.S. taxes on those profits if they were not offshore. Oracle currently pays a tax rate of less than one percent to foreign governments on its offshore cash, suggesting that most of the money is kept in tax havens.
• Google: The company reported operating 25 subsidiaries in tax havens in 2009, but since 2010 only discloses two, both in Ireland. During that period, it increased the amount of cash it had reported offshore from $7.7 billion to $33.3 billion. An academic analysis found that, as of 2012, the 23 no-longer-disclosed tax haven subsidiaries were still operating but that Google was choosing not to include them in its annual filings.

“These companies benefit from America’s infrastructure, educated workforce, security, and access to the largest consumer market in the world. They should not be able to use loopholes to get out of paying for it,” added Scarr.

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. Such measures are included in Senator Levin’s CUT Loopholes Act (S.268).