The Institute for Policy Studies (IPS) has just released a report on tax havens, Corporate Pirates of the Caribbean. The report shows that the corporations engaged in the “Fix the Debt” austerity push would gain up to $173 billion in tax breaks from their proposal for a “territorial tax system.” So under the guise of cutting deficits (because the public thinks they want that), these companies are actually pushing a plan to line their pockets while adding to deficits.
Here’s what’s up. Currently taxes on offshore profits are “deferred” until a company “brings the money home.” In other words, American multinational corporations don’t pay any taxes at all on profits made “outside” the US as long as they keep the profits “out of the country.” Then when they do bring the money back, all taxes paid elsewhere are deducted from any taxes due. (Currently between $1.7-$2 trillion is being held hostage this way.) And then they periodically come to the government and demand a “tax holiday” – a very low tax rate to bring the money back, promising to use it to “create jobs.” (Of course they don’t end up using it for that.)
Because of this huge loophole the giant multi-national companies move jobs and factories and proifit centers out of the country or use offshore tax havens (hence the totle “Corporate Pirates of the Carribean”) to pretend that they made those profits outside of the country.
The Fix the Debt proposal for a “territorial tax” makes this arrangement permanent, so of course all the rest of the jobs, factories and profit centers will move out of the country, too — or companies will pretend they were.
The key findings from the report:
- The 59 Fix the Debt member corporations that reported their offshore profits had a combined total of more than $544 billion at the end of 2012, up from $473 billion in 2011. The average offshore stash per company rose 15 percent last year to $9.4 billion.
- Currently, these profits are not subject to U.S. corporate income taxes unless they are brought back to the United States (also known as “repatriation”). If Congress adopts Fix the Debt’s proposed territorial tax system, these 59 companies would stand to win as much as $173 billion in immediate tax windfalls.
- The biggest potential winner is General Electric, which could reap a tax windfall of as much as $38 billion on its overseas earnings stash of $108 billion.
- The Fix the Debt member with the largest increase in offshore untaxed profits in 2012 among firms with more than $1 billion in offshore profits was Honeywell, with a 43 percent increase to $11.6 billion in 2012.
- Twenty-two firms reported increases of more than 20 percent in their untaxed offshore profits last year.
You can download the full report here.