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The Biggest Tax Scam Ever: How Corporate America Parks Profits Overseas, Avoiding Billions in Taxes

Posted on August 29th, 2014 at 14:28 by John Sinteur in category: Robber Barons -- Write a comment

[Quote]:

As Burger King heads north for Canada’s lower corporate tax rate, we speak to Rolling Stone contributing editor Tim Dickinson about his new article, “The Biggest Tax Scam Ever.” Dickinson reports on how top U.S. companies are avoiding hundreds of billions of dollars by parking their profits abroad — and still receiving more congressionally approved incentives. Dickinson writes: “Top offenders include giants from high-tech (Microsoft, $76 billion); Big Pharma (Pfizer, $69 billion); Big Oil (Exxon­Mobil, $47 billion); investment banks (Goldman Sachs, $22 billion); Big Tobacco (Philip Morris, $20 billion); discount retailers (Wal-Mart, $19 billion); fast-food chains (McDonald’s, $16 billion) – even heavy machinery (Caterpillar, $17 billion). General Electric has $110 billion stashed offshore, and enjoys an effective tax rate of 4 percent – 31 points lower than its statutory obligation to the IRS.”

[..]

And small business is not benefiting from all these tax games that multinationals are able to play, and they’re having to compete with these companies here.

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So, Apple has this amazing deal, where they’ve got essentially a shadow company in Ireland. And it’s incorporated in Ireland, but for Irish purposes, it’s an American company, and for American purposes, it’s an Irish company. And so you end up with this black hole of taxation where in fact this Apple subsidiary files a tax return to no government in the world. And so, it can use all kinds of accounting tricks to funnel money to this company, and they sit there essentially absolutely untaxed. Just there’s no tax return. And so you have billions of dollars sitting there. And again, when Apple needs billions of dollars to fund its American operations, it has bond offerings, and its cost of borrowing here in the United States is incredibly low. Just investors are virtually paying Apple to raise this money, because it’s secured by these massive piles of cash, technically abroad, although they’re actually banked reportedly in Manhattan.

And any international company NOT doing this would be facing shareholder lawsuits over it.

  1. Oh, the horror! Small companies that don’t do business overseas do not get tax loopholes on overseas profits! Horrors!

    Every single American individual is going to take whatever tax deduction they legally can. And yet they’ll whine when companies do the same thing. Can we PLEASE start shaming politicians for not closing the legitimate loopholes instead of shaming companies for legally lowering their tax bills? And shame journalists for these lousy articles?

  2. And here I was reading “we need to level the playing field world wide and close these loopholes” in the line about small business…

  3. The problem is the companies control congress and have these loopholes written into the tax code. Individuals don’t have that kind of power.

  4. I’m all for leveling the playing field. I’m also for disabling some of these constructions. But if large company A has a subsidiary in China and makes money there and leaves that money abroad rather than repatriating it and paying taxes on it, how does that affect the competition between A and smaller company B back here in the US?

  5. And plenty of other examples… This is something that can likely only be resolved by having a single world-wide tax on these kind of things. And the can of worms you open when you do that…. oh boy.

  6. A single world-wide tax isn’t going to happen. Based on the pain resulting from the Euro, I think there’s an easy argument to make that it’s not even desirable. And I think for the sake of diversity and experimentation alone it’s worth having different tax regimes in different countries, or at least the possibility thereof.

    I don’t know how to solve the corporate tax-haven problem. I’m tempted to conclude that the solution is the same as the solution to music/movie piracy: make it cheap and easy to conform to the desired behavior. This may mean shifting the tax burden to different places (e.g. VAT, carbon tax, …?).

  7. no, I don’t have a solution either… it’s difficult enough to not let companies externalize any costs, let alone do a good honest tax…

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