Offshore Tax Havens Cost Small Businesses on Average $5,128 a Year

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U.S. PIRG Education Fund

Small businesses in the U.S. have to shoulder, on average, an extra $5,128 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 U.S. Public Interest Research Group Education Fund. 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 businesses are conducting prolific amounts of business in the Cayman Islands,” said Alexandria Robins, tax and budget associate with U.S. PIRG. “Our tax code is balanced in favor of big multinational corporations, and that means here at home we’re losing out on lower tax rates, more funding for public programs, or cuts to 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. Offshore tax havens give large multinationals a competitive advantage over small businesses that are unwilling or unable to book profits offshore and cut down their tax bill.

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 maintains five tax haven subsidiaries and keeps $124 billion, on which it would otherwise owe $39.3 billion in additional U.S. taxes. 

•       Pfizer operates 181 subsidiaries in tax havens and holds $193.6 billion in profits offshore for tax purposes, the second highest among the Fortune 500.

“We know that these large corporations get millions in tax breaks. We know they’re making promises that they aren’t sticking to, and it is time we hold them accountable to pay what they owe,” said Maurice Rahming, owner of O’Neill Electric in Portland Oregon and member of Main Street Alliance, an organization that works to provide small businesses a voice on the most pressing public policy issues across the nation


The report recommends closing a number of offshore tax loopholes. Many of these reforms are included in the Stop Tax Haven Abuse Act, introduced by Rep. Doggett in the House (H.R.297). State governments should also take measures to reclaim some of the revenue lost to tax havens. U.S. PIRG found that by passing a simple, proven reform already on the books in Montana and Oregon, states could collectively save $1 billion annually.

Click here for a copy of “Picking Up the Tab: Small Businesses Bear the Burden for Offshore Tax Havens.”


Click here to see an earlier study showing how states can crack down on offshore tax dodging.