One of the strangest things about the corporate tax debate is that it is nearly impossible to figure out the amount companies are actually paying. Nowhere is there a straightforward number showing how much in federal taxes a firm pays to the U.S. Treasury every year.
– From a recent Washington Post article published March 26
Back in March 2011, I first discussed the extreme extent to which the largest corporations in America go in order to avoid paying taxes, when I highlighted how GE has a unit of 975 people devoted entirely to achieving this end. It was clear back then that the biggest multinational companies in the nation take advantage schemes and loopholes that would never be available to the average citizen. Tactics such as the “Double Irish” and the “Dutch Sandwich,” which these corporations expend considerable resources implementing. Well, now we have an update on the story courtesy of the Washington Post. We learn that:
Companies have also found ways to shift their income across national boundaries, roving from country to country in search of the lowest tax burden. Ed Kleinbard, a tax professor at the University of Southern California Gould School of Law, has dubbed these movable earnings “stateless income.”
The trend has revolutionized company tax planning, especially in businesses that rely on intellectual property. The Senate Permanent Subcommittee on Investigations found that from 2009 to 2011, Microsoft, a member of the Dow 30, was able to shift offshore almost half its net revenue from U.S. retail sales, or roughly $21 billion, by transferring intellectual-property rights to a Puerto Rican subsidiary. As a result, the subcommittee found that Microsoft saved up to $4.5 billion in taxes on products sold in this country.
Robert Willens, who has been a corporate tax expert for more than 40 years, said he has noticed an unprecedented level of enthusiasm for reducing taxes. “Maybe it’s just the pressure to produce profits,” Willens said. “I think people realize now that it’s not difficult to avoid U.S. taxes . . . and investors are demanding consistently improving performance.”
According to a Congressional Research Service report from January, U.S. multinationals in 2008 reported 43 percent of their overseas profits in Bermuda, Ireland, Luxembourg, the Netherlands and Switzerland, all places famous for having among the lowest tax rates in the world.
The same report noted that profits reported in Bermuda rose from 260 percent of the country’s economic output in 1999 to more than 1,000 percent in 2008.
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