WISPIRG Foundation
Press Release

Study: 70% of Fortune 500 Companies, of Which 5 are Wisconsin-Based, Used Tax Havens in 2013

30 companies booked more cash offshore than others combined

By - Jun 5th, 2014 11:53 am

Madison, June 5 – Tax loopholes encouraged more than 70 percent of Fortune 500 companies – including Johnson Controls, Rockwell Automation and Manpower here in Wisconsin – to maintain subsidiaries in offshore tax havens as of 2013, according to “Offshore Shell Games,” released today by WISPIRG Foundation 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 Bruce Speight, WISPIRG Foundation Director. “We’ve made it too easy for American multinationals to dodge taxes by setting up shell companies in tax havens, it hurts all Wisconsin taxpayers. We simply shouldn’t allow companies that use Wisconsin roads, and benefit from our education system and large consumer market, to take a free ride at the expense of the rest of us.”

“The loopholes in America’s corporate tax have grown so outrageous that our policymakers should be embarrassed,” said Steve Wamhoff, CTJ legislative director. “The data in this report demonstrate that a huge portion of the supposedly ‘offshore’ profits are likely to be U.S. profits that are manipulated so that they appear to be earned in countries like Bermuda or the Cayman Islands where they won’t be taxed. Policymakers should close the loopholes that make this manipulation possible.”

Every year, offshore tax loopholes used by U.S. corporations cost Wisconsin an estimated $28.8 million in state tax revenue. That money would be enough to provide a $10 tax cut for every person who filed a tax return in 2010, or pay the salary for over 530 school teachers based on the average teacher salary in Wisconsin.

WISPIRG Foundation’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 Wisconsin that were highlighted by the study include:

–          Rockwell Automation reported operating 12 tax haven subsidiaries in 2012 but disclosed only 5 in 2013. The company increased the profits it booked offshore for tax purposes by nearly $350 million over the course of that year and now books a total of 2.4 billion offshore. It does not disclose what it would pay in taxes if those profits were not booked offshore.

–          Manpower reported operating 43 tax haven subsidiaries in 2013, including four in Luxembourg and one in the British Virgin Islands. Manpower discloses four fewer tax haven subsidiaries than last year while booking $738 million offshore for tax purposes as of 2013, an increase of $143 million from last year. The company does not disclose what it would pay in taxes if those profits were not booked offshore.

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 at: http://wispirg.org/reports/wip/offshore-shell-games-2014.

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