American companies avoid paying taxes by holding over $2 trillion in assets outside of the country; a new study shows.
A total of $2.1 trillion are abroad, according to a report co-authored by Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund. This money is largely held abroad to avoid paying taxes on corporate profits in the United States, helping companies escape paying about $620 billion to the U.S. government.
The number of companies that have assets held in tax havens reached 358, the report showed, by operating subsidiary holding companies that exist largely to avoid paying taxes in the United States. Most of those holding companies are in Bermuda and the Cayman Islands.
"U.S.-based multinational corporations are allowed to play by a different set of rules than small and domestic businesses or individuals when it comes to the tax code. Rather than paying their full share, many multinational corporations use accounting tricks to pretend for tax purposes that show a substantial portion of their profits are generated in offshore tax havens, countries with minimal or no taxes where a company’s presence may be as little as a mailbox,” said the U.S. PIRG authors of the report.
Disclosed Tax Payments
The study shows 57 of the Fortune 500 companies disclose how much unpaid taxes are thanks to their offshore assets. In total, those firms avoid $184.4 billion in additional federal taxes, the U.S. PIRG asserts, while taxes paid to foreign countries for their held assets averages 6%. That is about 15% of the corporate tax rate in the United States.
The study argues that approximately $620 billion is lost because of these hidden assets across all Fortune 500 firms hiding assets abroad.
The study points to Apple, American Express, and Nike as the most aggressive in avoiding U.S. taxes, with a total of $199.1 billion hidden abroad. Nike’s tax rate to foreign countries is 2.5%, the study argues, thanks in large part to its three subsidiaries in Bermuda.
Apple has the most assets held offshore, with $181.1 billion booked abroad. This structure allows Apple to avoid paying $59.2 in taxes if those assets returned to the United States.
The study concludes that changes to the U.S. tax system are required to allow companies to repatriate earned revenue. "Congress can and should take strong action to prevent corporations from using offshore tax havens, which in turn would restore basic fairness to the tax system, reduce the deficit and improve the functioning of markets,” the U.S. PIRG said in a statement.