A loophole in our nation’s tax laws allows multinational companies and hedge funds to shelter enormous sums of money from taxes by creating offshore identities and using tax-haven banks.
Corporate executives claim that if they are allowed to bring the cash into the United States without paying taxes on it, they can use the money to create badly needed jobs. But a new report shows a tax amnesty would only be an incentive to stash even more money away overseas.
The study by the nonpartisan Citizens for Tax Justice (CTJ) shows the 20 companies that brought the most offshore profits to the United States after Congress approved a tax amnesty in 2004 have almost tripled the amount of profits parked overseas as they did at the end of 2005.
These corporations, which include well-known companies like Pfizer, Merck, Hewlett-Packard, Coca-Cola, Citigroup, McDonald’s and many others, collectively had $269.6 billion in “permanently reinvested earnings” parked offshore largely in tax havens at the end of 2004. This offshore hoard shrank as expected in 2005, to $152 billion, after these companies repatriated most of it in response to the tax amnesty. But their offshore hoard immediately climbed to new highs in the years afterward, reaching $426.5 billion in 2010.
This practice costs nearly $100 billion in taxes each year, according to the Senate Permanent Subcommittee on Investigations. Last month, Sen. Carl Levin (D-Mich.) introduced the Stop Tax Haven Abuse Act, which would close these tax loopholes and strengthen the government’s ability to collect taxes that are due.
The CTJ report also calls into question a recent study by the New Democrat Network (NDN), which claims that a second repatriation amnesty would actually raise revenue rather than increase the budget deficit.
Read the full CTJ report here.