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Making Corporate Offshore Tax Dodging A Campaign Issue

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From flickr.com/photos/68751915@N05/6870876951/: Sending money abroad to dodge taxes. Corporate offshore tax dodging should be a campaign issue.
Sending money abroad to dodge taxes. Corporate offshore tax dodging should be a campaign issue.
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Is there any reason why stopping U.S. firms from setting up offshore headquarters' to avoid taxes should not become a major issue in this presidential election?

"The tax savings from ostensibly moving a corporation's headquarters offshore are immense," writes David Cay Johnston in his book "Perfectly Legal"(Penguin Group).

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And all businesses have to do is move the address of their corporate headquarters to Bermuda or some other tax haven, such as the Cayman Islands or Panama.

"That way profits could be earned tax-free in the United States. Under a treaty with Barbados, U.S. profits could be converted into tax-deductible expenses that would become profits only when the money was accounted for offshore. The company's real headquarters would stay in the United States. The Bermuda headquarters would be nothing more than a mail drop," Johnston wrote.

Example: Ingersoll-Rand pays $27,000 a year to maintain a Bermuda post office box as its legal headquarters."That little trick lets it escape $40 million in corporate taxes," Johnston writes. Bermuda gave the same deal to Houston's Cooper Industries, an industrial equipment maker.

More examples: Five Houston oilfield services firms moved their tax address to Bermuda or the Cayman Islands in 2001-2002 "and will pay little or no American corporate income tax in the future," Johnston writes.
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These outfits are Global Sana Fe, Nabors Industries, Noble Drilling, TransOcean and Weatherford International.

The effective tax rates U.S. corporations pay for making themselves "legally resident" in Barbados, is one percent, Johnston writes, compared to the U.S. rate of 35 percent.

Anyway, you get the idea. Among the "patriots" who have dodged the IRS were George W. Bush, later president, when he was a director of Harken Energy, the Texas oil drilling company. In 1989, Harken "created an offshore subsidiary that could have allowed it to escape American taxes," Johnston writes.

And during the five years that Vice President Dick Cheney was CEO of Halliburton, the Dallas oil services and engineering company, it created at least 20 subsidiaries in the Cayman Islands, Johnston added.

Many corporations that relocated abroad on paper claimed they were being taxed twice, Johnston reported, once by the foreign government and then again in the U.S. "There was just one small problem with that claim: it was false."

As Barry Ritholtz wrote in BloombergView, "Some estimates are that these tax maneuvers have cost the U.S. taxpayer almost $20 billion over the past 10 years. I suspect that number is off by an order of magnitude. Just two companies, Apple and Google...could account for that much in forgone tax revenue. Everyone else's taxes go up accordingly when these companies skip out on what they owe."

The White House candidate who appears most likely to thwart corporate tax dodgers is Vermont's Senator Bernie Sanders, an Independent. In his review of "America's Top 10 Corporate Tax Avoiders" published on his web site, he identifies the following firms that have sheltered profits from IRS by using overseas mail-drops.

General Electric---In 2012, GE stashed $108 billion in offshore tax havens to avoid paying income taxes. If this practice were outlawed, GE would have paid $37.8 billion in federal income taxes that year. (Sanders also noted, "GE has been a leader in outsourcing decent paying jobs to China, Mexico and other low-wage countries.")

Verizon---In 2012, Verizon stashed $1.8 billion in offshore tax havens to avoid paying U.S. income taxes. Verizon would owe an estimated $630 million in federal income taxes if its use of offshore tax avoidance was eliminated.

Bank of America---received a $1.9 billion tax refund from the IRS in 2010, even though it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of more than $1.3 trillion. In 2012, BoA operated more than 300 subsidiaries incorporated in offshore tax havens like the Cayman Islands, which has no corporate taxes.

That year BoA stashed $17.2 billion in offshore tax havens to avoid paying U.S. income taxes. BoA would owe an estimated $4.3 billion in federal income taxes if its use of offshore tax avoidance strategies were eliminated.

Citigroup---made more than $4 billion in profits in 2010, but paid no federal income taxes. Citigroup received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury during the financial crisis. Citigroup has established 427 subsidiaries incorporated in offshore tax havens.

In 2012, Citigroup stashed $42.6 billion in offshore tax havens to avoid paying U.S. income taxes. Citigroup would owe an estimated $11.5 billion in federal income taxes if its use of offshore tax avoidance strategies were eliminated.

Pfizer---In 2012, Pfizer stashed $73 billion in profits offshore and has used aggressive offshore tax strategies to avoid paying U.S. income taxes.

Honeywell---In 2012, it stashed $11.6 billion in offshore tax havens to avoid paying U.S. income taxes. Honeywell would owe an estimated $4.06 billion in federal income taxes if its use of offshore tax avoidance were eliminated.

Merck---In 2012, it stashed $53.4 billion in offshore tax haven countries to avoid paying income taxes. If this practice was outlawed, it would have paid $18.69 billion in federal income taxes.

Corning---It has stashed $11.9 billion in offshore tax havens to avoid paying U.S. income taxes. Corning would owe an estimated $4.165 billion in federal income taxes if its use of offshore tax avoidance were eliminated.

With luck, Americans will elect a president to put an end to corporate tax avoidance. #

 

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Sherwood Ross worked as a reporter for the Chicago Daily News and contributed a regular "Workplace" column for Reuters. He has contributed to national magazines and hosted a talk show on WOL, Washington, D.C. In the Sixties he was active as public (more...)
 

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