A study released on Tuesday, by two non-profit groups - Citizens for Tax Justice and the U.S. Public Interest Research Group Education Fund - shows that 500 of the largest American corporations hold over $2.1 trillion in accumulated profits offshore, to avoid U.S. taxes. Of the firms, 30 alone account for $1.4 trillion or 65% of the total accumulated profits. The study showed that between 2008 and 2014, the amount of offshore cash holdings for American multinationals doubled.
The study said, "For many companies, increasing profits held offshore does not mean building factories abroad, selling more products to foreign customers, or doing any additional real business activity in other countries. Instead, many companies use accounting tricks to disguise their profits as 'foreign,' and book them to a subsidiary in a tax haven to avoid taxes."
The group of large companies - by gross revenue - would collectively owe an estimated $620 billion in U.S. taxes if their foreign tax havens located in countries including Bermuda, Ireland, the Netherlands and the Cayman Islands - got the axe. The reported profits of subsidiaries of U.S. companies holding money offshore was more than GDPs of the countries in which the firms were registered.
The conclusion was based on the companies financial filings with the Securities and Exchange Commission.
According to the study, "At least 358 companies, nearly 72 percent of the Fortune 500, operate subsidiaries in tax haven jurisdictions as of the end of 2014. All told these 358 companies maintain at least 7,622 tax haven subsidiaries."
Per the study, fifty-seven of the companies disclosed that they would expect to pay a combined $184.4 billion in additional U.S. taxes if their profits were not held offshore. The filings indicated they were paying about 6% in taxes overseas versus a 35% U.S. corporate tax rate.
The study concluded that, "Congress can and should take strong action to prevent corporations from using offshore tax havens, which in turn would restore basic fairness to the tax system, reduce the deficit and improve the functioning of markets."
In the study, Apple, Inc. (AAPL - Nasdaq) by far has the highest amount held offshore. From its three overseas tax havens, Apple is holding $181.1 billion offshore and would owe an estimated $59.2 billion in U.S. taxes if it brought the money back to the United States.
Other companies with the most offshore holdings in tax havens:
General Electric Company (GE - NYSE) $119 billion
Microsoft Corporation (MSFT - Nasdaq) $108.3 billion
Pfizer Inc. (PFE - NYSE) $74 billion
International Business Machines Corporation (IBM - NYSE) $61.4 billion
Merck & Co. Inc. (MRK - NYSE) $60 billion
Johnson & Johnson (JNJ - NYSE) $53.4 billion
Cisco Systems, Inc. (CSCO - Nasdaq) $52.7 billion
Exxon Mobil Corporation (XOM - NYSE) $51 billion
Alphabet, Inc. (GOOG - Nasdaq) $47.4 billion
Procter & Gamble Company (PG - NYSE) $45 billion
Citigroup Inc. (C - NYSE) $43.8 billion
The study said, “Congress has created loopholes in our tax code that allow offshore tax avoidance, which forces ordinary Americans to make up the difference. The practice of shifting corporate income to tax haven subsidiaries reduces federal revenue by an estimated $90 billion annually.”
Contributed by Millennium Traders