Bill Knight column for Mon., Tues. or Wed., Aug. 19, 20 or 21
Apple avoided paying $26 billion in federal taxes, is was shown in Congressional hearings on global tax avoidance, but Apple is one of 290 Fortune 500 companies that at least revealed keeping some of their income as “permanently re-invested” overseas (so 210 don’t disclose).
Twenty of the biggest companies that don’t divulge and are estimated to have millions in cash offshore include Caterpillar, Coca-Cola, DuPont, Proctor & Gamble and Walmart, according to Citizens for Tax Justice (CTJ).
Apple also is one of 18 huge companies that, together, kept $92 billion from the Treasury (plus others that keep it hidden or lie), CTJ says.
It’s “a clear indication that very little tax has been paid on those profits to any government –an indicator that much of these offshore profits are being stashed in tax havens such as the Cayman Islands,” according to CTJ’s report “Apple is Not Alone.”
“Many of the large multinationals that fail to disclose whether their offshore profits are stored in tax havens are the same companies that have lobbied heavily for tax breaks on their offshore cash,” CTJ adds.
Meanwhile, President Obama is offering Congress a corporate tax compromise, calling for reducing the corporate tax rate from 35% to 28% (and 25% for manufacturers).
An earlier White House tax-overhaul idea tied corporate relief with individual tax reform, but not now.
Now, corporations can indefinitely defer paying taxes they owe if profits stay offshore, and other companies that probably have profits squirreled away in tax havens, CTJ says, include American Express, Dell, Eli Lilly, General Electric, Microsoft and Nike.
“General Electric does not disclose the U.S. tax it would owe if its $108 billion offshore stash was repatriated,” CTJ says. “But in its 2009 annual report, GE noted that it had reclassified $2 billion of previously earned foreign profits as ‘permanently reinvested’ offshore, and said that this change resulted ‘in an income tax benefit of $700 million.’ Since $700 million is 35% of $2 billion, this is an admission that the expected foreign tax rate on this $2 billion of offshore cash was exactly zero, which suggests that GE’s ‘permanent reinvestment’ plan for this $2 billion involved assigning it to one of its tax-haven subsidiaries.”
Economist, author and former Labor Secretary Robert Reich said, “Corporations want corporate tax reduction to be the centerpiece of ‘tax reform’ come the fall. The President has already signaled a willingness to sign on in return for more infrastructure investment. But the arguments for corporate tax reduction are specious.”
Indeed, here are a dozen facts about “tax-dodging corporations,” according to Richard Eskow of the Campaign for America’s Future:
Corporate tax rates are near their 60-year low, even though profits are at a 60-year high.
Some huge corporations paid LESS than nothing.
We’re told we can’t “afford” full Social Security benefits, even though closing corporate tax-haven loopholes would pay for Obama’s benefit cut more than 10 times over.
Wells Fargo got $8 billion in tax breaks, even as executives at its subsidiary Wachovia avoided indictment for laundering $378 billion for the Mexican drug cartels.
U.S. corporations are holding an estimated $1 trillion offshore.
One Cayman Islands building is the official location of 18,857 corporations.
Conservatives complain about the “official” corporate tax rate, but corporations (that pay) actually pay about one-third of that, the “effective” rate.
Corporations used to pay 30 percent of federal taxes but now pay less than 7%.
Big corporations’ campaign contributions to Congress topped $215 million – and got $223 BILLION in tax breaks.
We don’t even know who owns some corporations, and that makes it easier to evade taxes (plus dodge creditors, avoid paying alimony or child support, or even fund terrorism).
Bank of America committed foreclosure fraud, was bailed out by the government, and then paid no taxes on $4.4 billion in profit.
What’s called “tax reform” would actually prevent Congress from offering financial incentives to improve citizens’ lives.
So: Real reform is needed. Tax law should be written to restore the obligation that dollars earned here are taxed here, apart from where profits are “deposited,” a practice that annoys lawmakers ranging from Republican U.S. Sen. John McCain of Arizona to Democratic U.S. Sen. Carl Levin of Michigan.
“A sensible solution would be to simply end ‘deferral,’ repealing the rule that indefinitely exempts offshore profits from U.S. income tax until these profits are repatriated,” CTJ says.
[PICTURED: Publicserviceeurope.com cartoon by Rafa Sanudo]