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

Oregon-based Nike among worst offenders

OSPIRG Foundation

Portland – Tax loopholes encouraged more than 70 percent of Fortune 500 companies – including Nike in Oregon – to maintain subsidiaries in offshore tax havens as of 2013, according to “Offshore Shell Games,” released today by OSPIRG Foundation 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 OSPIRG Foundation’s Consumer and Taxpayer Advocate Celeste Meiffren-Swango. “We’ve made it too easy for American multinationals to dodge taxes by setting up shell companies in tax havens and it hurts all Oregon taxpayers. We simply shouldn’t allow companies that use Oregon 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 Oregon $283 million in state tax revenue. [1] In the 2013 legislative session, the Oregon legislature closed one loophole that is estimated to keep $18 million in Oregon every year. But action is needed at the federal level to end tax haven abuse.

OSPIRG Foundation’s new study shows that while most very large companies use tax havens, a smaller subset is most aggressive about using offshore tax havens to avoid taxes.

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

Nike: The sneaker giant reports having $6.7 billion booked offshore, on which it would otherwise owe $2.2 billion in U.S. taxes. That means they pay a mere 2.2 percent tax rate on those offshore profits, suggesting nearly all of the money is held by subsidiaries in tax havens. Nike does this in part by licensing the trademarks for some of its products to 12 subsidiaries in Bermuda to which it must pay royalties. Its Bermuda subsidiaries actually bear the names of their products like “Air Max Limited” and “Nike Flight.”

Precision Castparts: This company maintains 11 subsidiaries in offshore tax havens, including one in Bermuda and two in the Cayman Islands. The company reports having over $1 billion booked offshore for tax purposes, but does not disclose what it would owe in taxes if it had not booked those profits offshore.

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. 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.

“Paperjam Press does its small part to make our community better,” said Deborah Field, owner of the digital print and design shop in NE Portland, and Executive Team Member of The Main Street Alliance of Oregon. “Our taxes help pay for roads, bridges, schools, and other public services that my business and my customers depend on. We should close the loopholes that let some multinationals skip out on paying their fair share for the services that helped them make their profits–we need to level the playing field for Main Street businesses.”

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.

Read the full report “Offshore Shell Games: The Use of Offshore Tax Havens by Fortune 500 Companies” at: 

[1] The Hidden Cost of Offshore Tax Havens, OSPIRG Foundation. 2/5/13.