Report: At Least 18 Fortune 500 Companies Use Offshore Tax Havens

Thursday, 06 Jun 2013 07:59 AM

By Michael Kling

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Apple is not the only corporation hiding billions of dollars in offshore tax havens.

Financial reports of 17 other Fortune 500 corporations strongly suggest they have paid little or no tax on their offshore holdings, according to a report from the nonprofit advocacy group Citizens for Tax Justice (CTJ).

They include Microsoft, Dell, Nike, American Express and pharmaceutical giant Eli Lilly. Together, the 18 corporations reported $283 billion held in offshore tax havens.

Editor's Note:
An $87,500 Tax Loophole Discovered by Cherry Hill Accountant

Many other Fortune 500 companies probably also use the rule allowing them to indefinitely defer paying U.S. income taxes on offshore profits, CTJ notes.

Corporations often disclose in financial reports how much taxes they would have paid without that deferral. By revealing they would pay at least a 30 percent U.S. tax rate if their offshore holdings were brought home, or repatriated, they clearly indicate they have yet to pay little, if any, tax to any government, according to CTJ.

In their most recent financial reports, 290 Fortune 500 corporations disclosed holding some of their income as "permanently reinvested" foreign profits. But most — 235 out of 290 — declined to disclose the U.S. tax rate they would pay if these offshore profits were repatriated.

Accounting standards require public companies to reveal how much U.S. taxes they'd pay if they repatriated offshore profits. Yet a loophole allows them to say calculating the tax is "not practicable."

"Almost all of the 235 non-disclosing companies use this loophole to avoid disclosing their likely tax rates upon repatriation — even though these companies almost certainly have the capacity to estimate these liabilities," the report states.

The 20 largest non-disclosing companies, which include GE, Pfizer, IBM and Johnson & Johnson, held $720 billion in offshore income.

Instead of a temporary tax holiday as corporations have proposed, CTJ recommends repealing the exemption for offshore profits, while still giving those companies a tax credit for overseas taxes paid.

"If the Securities and Exchange Commission required more complete disclosure about multinationals' offshore profits, it would become obvious that Congress should end deferral," the group argues.

According to the U.S. Public Interest Research Group, the government loses $150 billion a year in tax revenue due to offshore tax havens. At least 83 of the nation's top 100 publicly traded companies use the tax havens.

"The average taxpayer paid $434 more this year to cover the billions that GE and others that use offshore tax havens skipped out on," it states in a report. "And small businesses and companies that don’t use these schemes have to struggle to compete with those that do."

Editor's Note: An $87,500 Tax Loophole Discovered by Cherry Hill Accountant

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