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Offshore Tax Havens Cost Average Illinois Small Business $5,789 A Year

Small business in Illinois would have to shoulder an extra $5,789.31 in taxes to make up for the revenue lost due to the abuse of offshore tax havens by multinational corporations, according to a new report by Illinois PIRG Education Fund.

As a new administration takes office and the possibility of tax reform again enters the national conversation, the report highlights how it's small domestic businesses and ordinary Americans that have to shoulder the burden of multinational tax avoidance.

"The amount of cash corporations book to offshore tax havens is only growing, and it's not because these corporations are actually conducting prolific amounts of business in the Cayman Islands," said Abe Scarr, Illinois PIRG Education Fund director.

"Our tax code is balanced in favor of big multinational corporations, and that means here at home we're losing out on lower individual tax rates, more funding for public programs, or decreasing our national debt."

Every year, corporations and wealthy individuals avoid paying an estimated $147 billion in state and federal income taxes by using complicated accounting tricks to shift their profits to offshore tax havens.

The report found that the average Illinois small business would have to pay $5,789.31 to cover the cost of offshore tax dodging by large corporations.

Offshore tax havens give large multinationals a competitive advantage over responsible small businesses which don't have subsidiaries in tax havens to reduce their tax bills. Small businesses get stuck footing the bill for corporate tax dodging.

Many of America's largest and best-known corporations use these complex tax avoidance schemes to shift their profits offshore and drastically shrink their tax bill. GE, Microsoft, and Pfizer boast the largest offshore cash hoards:

  • General Electric maintained 20 tax haven subsidiaries and parked $104 billion offshore in 2015. With the help of offshore subsidiaries, General Electric paid a federal effective tax rate of -1.6% over the past ten years. GE's tax rate was negative during that period because the company received net tax payments from the government.
  • Microsoft reported a total of $124 billion in offshore profits. If this money had not been shifted offshore, Microsoft would have owed an additional $39.3 billion in taxes.
  • Pfizer operates 181 subsidiaries in tax havens and holds $193.6 billion in profits offshore, the second highest among the Fortune 500. Pfizer recently attempted the acquisition of a smaller foreign competitor so it could reincorporate on paper as a "foreign company." Pulling this off would have allowed the company a tax-free way to avoid $40 billion in taxes on its offshore earnings, but fortunately the Treasury Department issued new anti-inversion regulations that stopped the deal from taking place.

32 Illinois Fortune 500 Companies hold at least $147 billion offshore, including:

  • AbbVie Inc: AbbVie has $25 billion offhsore, more than any other company in Illinois. Abbvie has 38 subsidiaries in tax havens.
  • Abbott Laboratories: Abbott Laboratories has subsidiaries in 94 tax havens, more than any other company in Illinois. They have $22.4 billion held offshore.

"With tax reform likely on the table for the new administration, it's vital that all decision-makers take into account the realities of how tax haven abuse hurts small businesses," Scarr said.

"In Illinois, any tax reforms should slam the door shut on the flow of corporate cash into tax haven countries, not open those flood gates more widely."

The report recommends closing a number of loopholes, including ending deferral, which allows corporations to defer paying taxes on profits booked offshore until they are brought back to the U.S.

States like Illinois can take action locally to end the flow of cash to offshore tax havens by closing the "water's edge loophole" and taxing profits booked to places like the Cayman Islands.


Previously in Tax Scammage:
* Deepwater Horizon Settlement Comes With $5.35 Billion Tax Windfall.

* Offshoring By 29 Companies Costs Illinois $1.2 Billion Annually.

* Government Agencies Allow Corporations To Write Off Billions In Federal Settlements.

* The Gang Of 62 Vs. The World.

* How The Maker Of TurboTax Fought Free, Simple Tax Filing.

* $1.4 Trillion: Oxfam Exposes The Great Offshore Tax Scam Of U.S. Companies.

* How Barclay's Turned A $10 Billion Profit Into A Tax Loss.

* Wall Street Stock Loans Drain $1 Billion A Year From German Taxpayers.

* German Finance Minister Cries Foul Over Tax Avoidance Deals.

* Prosecutor Targets Commerzbank For Deals That Dodge German Taxes.

* A Schlupfloch Here, A Schlupfloch There. Now It's Real Money.

* How Milwaukee Landlords Avoid Taxes.

* Study: 32 Illinois Fortune 500 Companies Holding At Least $147 Billion Offshore.

* Watch Out For The Coming Tax Break Trickery.

* When A 'Tax Bonanza' Is Actually A Huge Corporate Tax Break.


Previously in the Panama Papers:
* The Panama Papers: Remarkable Global Media Collaboration Cracks Walls Of Offshore Tax Haven Secrecy.

* The Panama Papers: Prosecutors Open Probes.

* The [Monday] Papers.

* Adventures In Tax Avoidance.

* Mossack Fonseca's Oligarchs, Dictators And Corrupt White-Collar Businessmen.

* Jonathan Pie, TV Reporter! They're All In It Together.

* Meet The Panama Papers Editor Who Handled 376 Reporters In 80 Countries.


Previously in the carried interest loophole:

* Patriotic Millionaires Vs. Carried Interest.

* The Somewhat Surreal Politics Of A Private Equity Tax Loophole Costing Us Billions (That Obama Refused To Close Despite Pledging To Do So).

* Fact-Checking Trump & Clinton On The Billionaire's Tax Break.


Comments welcome.


Posted on November 30, 2016

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