(11 am. – promoted by ek hornbeck)
The Goverment Accountability Office (GAO) released a report (pdf) on Friday detailing how the biggest U.S. companies are using offshore tax havens to avoid being responsible corporate citizens. The GAO summary explains:
Many U.S. corporations operate globally and have foreign subsidiaries… In some cases they may be used to reduce taxes…
Eighty-three of the 100 largest publicly traded U.S. corporations in terms of 2007 revenue reported having subsidiaries in jurisdictions listed as tax havens or financial privacy jurisdictions. Sixty-three of the 100 largest publicly traded U.S. federal contractors…
Not only that, but many of these corporations have received billions in federal bailout money and Senators Byron Dorgan (D-ND) and Carl Levin (D-MI) estimate this corporate tax exploit shifts $100 billion tax responsibility to other taxpayers in the form of loss tax revenue.
Mike Lillis of the Washington Independent highlights how the corporate double-dip works:
Bank of America – which received a $138 billion lifeline today, on top of $15 billion it’s already received under the Wall Street bailout (not to mention $10 billion injected into Merrill Lynch ahead of its acquisition by BoA) – operates 115 subsidiaries in 11 tax-haven countries, including Gibraltar and the Cayman Islands.
While Bank of America is asking for bailout money with one hand, it may be that BoA is hiding assets behind the secrecy off offshore tax havens.
“So what does it mean?” Lillis asks.
Well, it appears that these corporations are begging for taxpayers to bail them out for the bad investment decisions they made, while at the same time skirting their tax obligations to the United States. (I say “appears” because the GAO concedes that subsidiaries may be established in listed jurisdictions for a variety of nontax business reasons.” Still, for what other reason would Citigroup care to house operations on Aruba and the Isle of Man?).
Well Citigroup told Reuters that, they have “more than 4,000 subsidiaries throughout the world which enables us to serve hundreds of millions of individuals and institutions in more than 100 countries”.
That may be, however Dorgan and Levin are not convinced and said as much in a joint statement released in response to the report.
“We need to put an end to the use of offshore secrecy jurisdictions as tax havens. We must get to the bottom of activities such as the following: Citigroup has set up 427 tax haven subsidiaries to conduct its business, including 91 in Luxembourg, 90 in the Cayman Islands, and 35 in the British Virgin Islands. Hundreds more tax haven subsidiaries operate under strict secrecy laws in places like Switzerland, Hong Kong, Panama, and Mauritius,” Levin said.
“This report shows that some of our country’s largest companies and federal contractors, many of which are household names, continue to use offshore tax havens to avoid paying their fair share of taxes to the U.S. And, some of those companies have even received emergency economic funds from the government,” Dorgan said.
Currently this practice is legal, but Dorgan and Levin want to work with President-elect Barack Obama to close the loophole. “I think we should take action to shut down these tax dodgers, and we will be introducing legislation to do just that,” Dorgan said.
Cross-posted at Daily Kos.