Big multinational companies that shelter overseas profit from federal taxation cost the U.S. economy more than $100 billion a year by withholding more than $1 trillion collectively, according to a new study that may inflame the debate over tax fairness.
This week, anti-poverty group Oxfam America published a report that analyzed the financial reports of the 50 largest publicly traded U.S. companies. The organization found that behemoths such as Apple,General Electric, Microsoft and Google engage in tax havens that costs the U.S. $111 billion annually. Apple was cited by Oxfam as one of the biggest corporate offenders, holding some $181 billion in money offshore, followed by GE’s $119 billion and Microsoft’s $108 billion.
The U.S’s effective corporate tax rate is 35 percent, but the study found that companies used a variety of tax strategies to cut that rate to just 26.5 percent—with only 5 of the 50 companies paying the full 35 percent.
The Oxfam data put a new spin on a decades-old argument over U.S. corporate welfare and tax fairness. Companies frequently avail themselves of legal yet complex strategies that reduce the amount they pay in overseas earnings, the result of what critics argue is a tax regime shot through with distortions, moral hazards and perverse incentives.
The Congressional Budget Office points out that most corporations canlower their tax burden simply by deducting certain expenses. In a 2013 study, the CBO suggested that a change to foreign tax credit could boost revenues by at least $113 billion over a decade.
Oxfam said that an “opaque and secretive network” of over 1600 subsidiaries have conspired to stash around $1.4 trillion offshore, and linked that amount to the widening gap between rich and poor. The accusation takes on new significance in light of last week’s disclosures in the “Panama Papers” affair, which ripped the veil of secrecy from companies and wealthy individuals trying to shelter income.
“Tax dodging practices by corporations and enabled by federal policymakers contributes to dangerous inequality that is undermining our social fabric, and hindering economic growth,” the report said, as it urged both Congress and President Barack Obama to enforce tax haven abuse.
From 2008-2014, Oxfam’s analysis noted, the 50 companies collected more than $11 trillion in assorted loans, loan guarantees and bailout funds. Branding the current labyrinthine tax code as “rigged,” Oxfam contended that corporate efforts to subvert the system are depriving the government of needed revenue to fund education, health care and infrastructure.
Nonetheless, the Treasury Department reaped a record $1.48 trillion in tax revenue in the first half of fiscal year 2016, according to recent Treasury data, but still ran a deficit of nearly $500 billion. Last fiscal year, the federal government hauled in over $3 trillion in tax receipts, which was also a record.
Categories: America, The Muslim Times, US Economy, USA
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