Governments Enable Corporate Tax-Avoidance Schemes

Sunday, 05 May 2013 04:08 PM

By John Morgan

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They hardly lead the list of familiar tax havens, but the Netherlands and Ireland are vacuuming up global corporate cash by helping companies avoid hefty tax bills at home.

The two nations attracted foreign direct investment of $5.8 trillion by the end of 2012 – more than the much larger economies of the United States, U.K. and Germany combined, the Financial Times reported.

Only a small percentage of the cash influx entered the real Dutch and Irish economies. The rest went to "special purpose entities" – the finance and holding companies that help corporations avoid taxes, the Times said.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.

Ironically, even as controversy has arisen around the global tax avoidance schemes of
companies like Google and Starbucks, and while havens like Switzerland are closing tax
loopholes, major nations are joining a race to cut corporate taxes.

In his budget proposal, President Barack Obama suggested reducing the 35 percent U.S. corporate tax rate while eliminating business tax breaks, and British Chancellor of the Exchequer George Osborne called for cutting the U.K.'s corporate tax rate to 20 percent – the lowest in the G-20 group of nations.

Corporations in the U.S. and Europe disproportionately report profits in low tax countries to minimize and defer taxes, the Times said.

Angel Gurria, secretary-general of the Organization for Economic Cooperation and
Development (OECD), called for reforms, saying, "We cannot blame business for using the rules that policy makers themselves have put in place."

British Prime Minister David Cameron said last week the loss of tax revenue resulting from corporate tax evasion and aggressive avoidance was "staggering," according to the Irish Independent.

In a letter to the European Commission, Cameron said, "We must break through the walls of corporate secrecy."

"A lack of knowledge about who ultimately controls, owns and profits from companies leads to aggressive tax avoidance, tax evasion and money laundering, undermining tax bases and fueling corruption across the world."

Sen. Carl Levin (D-Mich.), a longtime foe of offshore tax avoidance, told The Hill that new OECD analyses showed "that the world is finally getting fed up with tax havens and offshore tax abuse."

"The critical next step is for the United States to close offshore tax loopholes that allow some multinational corporations and the wealthiest among us to force their tax burdens onto the backs of others," Levin said.

Editor's Note: How You Lost $85,000 During the Last Decade. See the Numbers.



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