Many of the largest corporations in our country hide profits made in the United States in offshore shell companies and sham headquarters in order to avoid paying billions in federal taxes. The result is massive losses in revenue for the U.S. Treasury – which ultimately must be made up by taxpayers.
The debt of a few is transferred to many – and to future generations. The U.S. Senate confirmed in the recently-passed fiscal year 2010 budget resolution that the use of offshore tax havens by large corporations “means that honest taxpayers face a higher burden.”
• The cost to taxpayers due to the use of offshore tax havens is as high as $100 billion per year – $1 trillion over 10 years. U.S.-based individuals and corporations who pay taxes on their revenues must shoulder this burden for those who do not.
• Taxpayers must shoulder the burden – U.S. PIRG Education Fund calculated each state’s taxpayer contribution proportional to their yearly federal contribution to make up for the $100 billion lost (See Figure 1).
• Our allies in other nations are also calling for decisive action to reign in these abusive tax havens. The Group of 20 (G-20), which provides a forum for world financial leaders to promote global economic stability, recently issued a communique providing for sanctions against tax haven countries.
• The federal government should relieve taxpayers of this unfair burden by closing the loopholes in the tax code that allow the use of offshore tax havens.
The impact of companies diverting profits to tax havens is real and it is both global and local in its reach. As American taxpayers face their yearly responsibility to report all of their earnings, policymakers should be reminded that there are many corporations who continue to hide theirs.