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Study: 70% of Fortune 500 Companies Used Tax Havens in 2013
30 companies booked more cash offshore than others combined
AUSTIN – Tax loopholes encouraged more than 70 percent of Fortune 500 companies – Exxon Mobil here in Texas – to maintain subsidiaries in offshore tax havens as of 2013, according to Offshore Shell Games released today by TexPIRG Education Fund and Citizens for Tax Justice. Collectively, the companies reported booking nearly $2 trillion offshore for tax purposes, with just 30 companies accounting for 62 percent of the total, or $1.2 trillion.
“Our tax code is broken, and it's hurting the public,” said Sara Smith of the TexPIRG Education Fund. “We’ve made it too easy for American multinationals to dodge taxes by setting up shell companies in tax havens, it hurts all Texas taxpayers. We simply shouldn’t allow companies that use Texas roads, and benefit from our education system and large consumer market, to take a free ride at the expense of the rest of us.”
“Each one of us must pay our fair share. This is just as true for Fortune 500 mega-corporations as it is for Texas’ working families,” said Craig McDonald, Director of Texans for Public Justice. “ When companies hide money in off-shore tax havens they’re not only cheating the taxman, they're cheating every one of us.”
Every year, offshore tax loopholes used by U.S. corporations cost Texas $300 million in state tax revenue. That money would be enough to pay the salaries of 8,763 new Texas teachers.
TexPIRG Education Fund’s new study shows that while most very large companies use tax havens, a smaller subset are most aggressive about using offshore tax havens to avoid taxes.
Key findings of the report include:
- At least 362 Fortune 500 companies operate subsidiaries in tax haven jurisdictions, as of 2013. All told, these companies maintain at least 7,827 tax haven subsidiaries. The 30 companies with the most money booked offshore for tax purposes collectively operate 1,357 tax haven subsidiaries.
- Approximately 64 percent of the companies with any tax haven subsidiaries registered at least one in Bermuda or the Cayman Islands. The profits that American multinationals collectively claim to earn in these island nations’ totals 1,643 percent and 1,600 percent, respectively of each country’s entire yearly economic output.
- The 30 companies with the most money booked offshore for tax purposes collectively hold nearly $1.2 trillion overseas. That is 62 percent of the nearly $2 trillion that Fortune 500 companies together report holding offshore.
- Only 55 companies disclose the amount they would expect to pay in U.S. taxes if they didn’t report profits offshore for tax purposes. All told, these 55 companies would collectively owe $147.5 billion in additional federal taxes, equal to the entire state budgets of California, Virginia, and Indiana combined. The average tax rate the 55 companies currently pay to other countries on this income is a mere 6.7 percent, implying that most of it is booked to tax havens.
Companies headquartered in Texas that were highlighted by the study include:
- Exxon Mobil, the most profitable company in America in 2013 reports booking $47 billion offshore. The oil giant maintains 38 subsidiaries in offshore tax havens, including 19 in the Bahamas, five in Luxembourg, and one in both Bermuda and the Cayman Islands.
- Apache ranks 30 for the most profits booked offshore among the Fortune 500 with an offshore cash stash of $17 billion. The company maintains 61 tax haven subsidiaries, 46 of which are registered in the Cayman Islands. Apache does not disclose what it would owe in U.S. taxes if it did not book profits offshore.
- FMC Technologies reports having over $1.5 billion booked offshore, on which it would otherwise owe $440 million in U.S. taxes. That implies they pay a mere 6.2% tax rate on those offshore profits, suggesting that most of the money is held by subsidiaries in tax havens. FMC Technologies maintains 11 subsidiaries in offshore tax havens including Luxembourg and Switzerland.
"Tax dodging is not a victimless offense. When multinational corporations skirt taxes, small businesses and individuals usually have to make up the difference. That means higher taxes for average taxpayers or cuts to public programs. Here in Texas, we want to have reasonable taxes without making unreasonable cuts to vital public programs – like education,” said Congressman Lloyd Doggett.
The report concludes that to end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore loopholes, strengthen tax enforcement, and increase transparency.
“Offshore Shell Games” is available for download here.
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