Large US firms stashed $1.6 trillion in tax havens

The 50 largest US companies, including Apple, Microsoft and Wal-Mart, are parking about $1.6 trillion in offshore tax havens to reduce their US tax burden, according to a study published Wednesday. 

Poverty-fighting organization Oxfam America said the sum for 2015 was a $200 billion increase over the prior year. The report cites the companies' own data.

While not illegal, the companies "used a secretive network of 1,751 subsidiaries in tax havens to stash" their earnings outside the United States, Oxfam said in the report released ahead of next week's meetings of the International Monetary Fund and World Bank in Washington.

"Tax avoidance has become standard business practice across the globe. Corporate tax dodgers cheat America out of approximately $135 billion in unpaid tax revenues every year," Oxfam senior advisor Robbie Silverman said. 

Apple is at the top of the ranking with more than $200 billion in offshore funds, followed closely by Pfizer laboratories ($193.6 billion) and Microsoft's IT group ($124 billion), the report said.

US law allows companies to keep profits from foreign operations offshore indefinitely, to avoid corporate taxes that are among the highest in the industrialized world. 

While the corporate tax rate is nominally 35 percent at the federal level, Oxfam said these 50 companies had an effective rate nearly 10 percentage points lower.

During his campaign, US President Donald Trump proposed cutting the rate to 15 percent, and allowing companies to repatriate their cash reserves with a one-time tax of 10 percent.

Oxfam criticized both proposals, saying the tax cut would help profitable companies and wealthy shareholders at the expense of important anti-poverty programs.

And the drastic reduction in corporate income tax will "feed into a destructive race to the bottom that has seen countries across the globe slashing corporate tax rates in recent years," the report said.

Meanwhile, "repatriation holidays reward companies for keeping money offshore and avoiding their taxes" and "incentivizes companies to move their profits to tax havens in expectation that they will eventually benefit from a one-time tax cut."

"President Trump promised to fix the rigged political and economic system yet his tax reforms will further enrich powerful corporates at the expense of ordinary people and small businesses," Silverman said. 

"The President and leaders in Congress must rethink their reforms and build a tax system that works for everyone and not just a fortunate few."

Source: AFP