US companies stashing $1.6 trillion off-shore

The 50 biggest American companies, including global brands Pfizer, Goldman Sachs, GE, Chevron, Wal-Mart, and Apple, stashed $1.6 trillion of US-based profits offshore –  $200 billion more than the previous year – according to a new report by Oxfam. 

The report, ‘Rigged Reform,’ reveals that big US companies are increasing their use of tax havens and boosting their investment in political lobbying of the American government in order to push for even greater tax breaks.  It warns that President Trump’s proposed tax reforms will further rig American tax laws in favour of the rich and powerful and intensify the destructive global race to the bottom on corporate tax - at the expense of poor communities in the US and around the globe.

In March a New Zealand Herald investigation revealed that Apple had paid zero tax in New Zealand in the past decade, despite selling billions of dollars’ worth of products to New Zealanders.

Oxfam New Zealand Executive Director Rachael Le Mesurier said: “New Zealand and many other countries around the world are missing out on crucial tax revenue from companies like Apple; money that could be invested in education, healthcare and infrastructure.

“At the heart of it is a global system that allows large corporations and extremely wealthy individuals to avoid paying their fair share – depriving governments, rich and poor, of the resources they need to provide vital public services and tackle rising inequality.

“Oxfam is calling on corporations to pay taxes where their actual economic activity takes place; end the use of tax havens; and for governments to work together to close tax loopholes so the system works for everyone and not just a fortunate few.

“Oxfam hopes that Minister Judith Collins’ current consultation on New Zealand tax policy will address these critical issues so that the law is consistent with our expectations of how corporations must pay their fair share of tax in the countries where they do business.”

The report finds:

·         The 50 largest US companies used a secretive network of 1751 subsidiaries in tax havens to stash about $1.6 trillion offshore in 2015. The companies reported an additional 143 tax haven subsidiaries and $200 billion in offshore earnings compared to 2014.

·         Tax reforms proposed by President Trump and leaders in Congress could give these 50 companies a windfall of between $312 and $327 billion on the profits they hold offshore, in addition to massive financial benefits resulting from a dramatic cut in corporate rates and other more favourable tax treatments.

·         The 50 companies spent $2.5 billion lobbying the US government between 2009 and 2015. An estimated $352 million was spent lobbying on tax issues – helping to secure over $423 billion in tax breaks. Oxfam estimates that for every $1 these companies spent lobbying on tax, they received an estimated $1,200 in tax breaks.

·         Five companies, General Electric, Verizon Communications, Comcast, AT&T and Exxon Mobil, account for approximately a quarter of all lobbying on tax by the top 50 companies.

·         On average these 50 companies are members of at least two coalitions lobbying for more favourable tax treatment, with eight of the 50 companies being members of four or more coalitions.  Wal-Mart leads the way as a member of at least six separate coalitions seeking to influence tax policy.

Robbie Silverman, Senior Advisor for Oxfam America, said:

“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. They use the same tricks and tools to cheat poor countries out of an estimated $100 billion annually.  This money could save the lives of six million children in the poorest countries, and get 124 million children into school for the first time.”

‘Rigged Reform’ highlights how President Trump’s tax reforms, which will primarily benefit the richest in society, are being paid for by cuts to programs designed to help the poorest people in the US and around the globe. This includes programs providing low-income Americans with affordable housing and job training, as well as a proposed 31 percent cut to overseas development aid at a time when 20 million children, women and men face starvation in Yemen, Somalia, South Sudan and Nigeria.

The proposal to cut US corporate tax rates from 35 percent to 15 percent will also feed into a destructive race to the bottom that has seen countries across the globe slashing corporate tax rates in recent years.   The proposed Border Adjustment Tax, which will increase taxes on imports and remove taxes on exports, is likely to harm poor consumers in the US and poor people around the world. Oxfam estimates the scheme’s impact on the value of the US dollar, and the knock on affect this has on the cost of debt repayments and commodity prices, may cost poor countries more than the US currently spends on poverty focused overseas aid.

Silverman said: “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.

“The US must work with governments around the globe to stop the mutually destructive race to the bottom on corporate tax and ensure all big businesses pay their fair share,” said Silverman.  

Notes

Oxfam’s analysis is an update to the 2016 ‘Broken at the Top’ report.  It analyses the tax practices of the 50 largest public companies in the US between 2009-2015.  These companies were identified from the Forbes 2000 list: Allergan, Alphabet (Google), American Express, American International Group (AIG), Amgen, Apple, AT&T, Bank of America, Berkshire Hathaway, Boeing, Capital One Financial, Chevron, Cisco Systems, Citigroup, Coca-Cola, Comcast, CVS Health, Dow Chemical, Exxon Mobil, Ford Motor, General Electric, General Motors, Gilead, Goldman Sachs, Home Depot, Honeywell International, IBM, Intel, Johnson & Johnson, JPMorgan Chase, Medtronic, Merck, MetLife, Microsoft, Mondelez, Morgan Stanley, Oracle, PepsiCo, Pfizer, Phillips 66, Procter & Gamble, Prudential Financial, United Technologies, UnitedHealth Group, US Bancorp, Verizon Communications, Walgreens, Wal-Mart, Walt Disney, and Wells Fargo.

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