Addicted to tax havens: The secret life of the FTSE 100

Addicted to tax havens: The secret life of the FTSE 100

ActionAid have produced another fine report, this time about the use of tax havens by multinational corporations listed on the FTSE 100. The statistics are staggering: for example more than half of the financial sector's overseas subsidiaries are in tax havens. More precisely:

• The FTSE 100 largest groups registered on the London Stock Exchange comprise 34,216 subsidiary companies, joint ventures and associates.
• 38% (8,492) of their overseas companies are located in tax havens.
• 98 groups declared tax haven companies, with only two groups, Fresnillo and Hargreaves Landsdown, who did not.
• The banking sector makes heaviest use of tax havens, with a total of 1,649 tax haven companies between the ‘big four’ banks. They are by far the biggest users of the Cayman Islands, where Barclays alone has 174 companies.
• The biggest tax haven user overall is the advertising company WPP, which has 611 tax haven companies.
• The FTSE 100 companies make much more use of tax havens than their American equivalents.
• There are over 600 FTSE 100 subsidiary companies in Jersey (more than in the whole of China), 400 in the Cayman Islands and 300 in Luxembourg – all tiny tax havens.

Alongside the financial sector, oil and mining companies are also huge users: TJN recently noted that they are often headquartered in Canada, and ActionAid noted that

"BP and Shell have almost 1,000 tax haven companies between them, including more than 100 in the Caribbean (hardly a major source of oil)."

(Recently we noted the huge role that the Netherlands plays in hosting offshore subsidiaries of oil companies, and another report by Publish What You Pay Norway noted the huge role played by Delaware too.)

ActionAid points to the artificiality of it all:

"In locations such as Mauritius, Jersey and Delaware we have identified hundreds of subsidiaries owned by dozens of different multinationals that are registered at a handful of individual addresses, belonging to offshore law firms."

And to the crucial development angle:

Corporate tax avoidance, one of the main reasons companies use tax havens, has a massive impact on developing and developed countries alike. The lack of transparency makes it difficult for developing country tax authorities to identify and collect taxes owed by global companies operating in their countries.

All credit to ActionAid for this:

This research is based on information that had never been disclosed, let alone analysed, until this year.11 UK law compels companies to report all of their subsidiary companies, together with their country of registration. When we looked for this information in early 2011, we discovered that more than half of the FTSE 100 were not complying with this legal obligation. When enquiries to individual companies failed to persuade them to disclose the information, we submitted complaints to Companies House, forcing the disclosures as part of companies’ annual returns and sparking Business minister Vince Cable to announce an investigation.

The Guardian, reporting this, (and providing a listing of the FTSE 100 and their subsidiaries) notes that:

"There is no standard definition of what constitutes a tax haven."

Indeed. We use the terms 'tax haven' and 'secrecy jurisdiction' interchangeably, and recently produced a two-pager (as part of our Financial Secrecy Index) entitled What is a Secrecy Jurisdiction? which says exactly that, and explores ways to think about the phenomenon.

Take a look, too, at ActionAid's useful Tax Haven Tracker.

Also see The Independent reporting on this, along with the Press Association, and Metro.

Older reports, involving the use of companies in tax havens by Swiss, US, France, and the Netherlands, are here. Further information on Spain, is here.

posted by TJN at 11:35 PM

Why Not Corporate Patriotism for a Change?: Ralph Nader

By Ralph Nader, Chicago Tribune

22 July 11

If companies are given American rights, they should have loyalty to this country too.

 

he fireworks and celebrations that mark Independence Day are over. But the need for a national conversation on corporate patriotism has never been more timely.

For more than 125 years the courts have been awarding corporations most of the constitutional rights possessed by human beings. Corporations - as artificial entities - now almost have rights equal to "We the people," even though the words "corporation" and "company" are not mentioned in the Constitution.

Under the current 5-4 conservative majority in the US Supreme Court, "corporate personhood" is spreading. The Citizens United v. Federal Election Commission case allows unlimited independent corporate expenditures for or against any political candidates.

Since large corporations keep unleashing their corporate attorneys to push the domain of corporations as "persons," it is way overdue to judge them by the same yardsticks as we judge real persons.

US corporations, chartered (born) in the US, rising to great size and profits because of American workers, saved or succored repeatedly by taxpayer subsidies and bailouts in Washington and state capitals, and sometimes rescued by US Marines or protected by the US fleets when they are in trouble abroad, owe the American people and our country some measure of loyalty and duty.

Instead of extending patriotic gratitude, large US corporations increasingly are sending the opposite message. "We're outta here, with your jobs," their behavior says. Unfortunately, some CEOs appear to have no problem with dictatorial communist regimes like China or oligarchies like Mexico that know how to oppress impoverished workers. Workers in China cannot start independent unions or uniformly use independent courts to recognize their health, safety and economic rights.Products from foreign sweatshops are exported back to the US where abandoned factories and communities proliferate.

Corporations say they love their country, especially when it comes to manufacturing modern weapons systems for the Pentagon. So let's extend this love and see how they measure up patriotically.

Is it patriotic for drug companies to leave our country without any production facilities for ingredients used in penicillin and other key drugs because they have shipped production rapidly in the past decade to China and India which lack the inspection standards we have here? Leaving America defenseless and so dependent in this critical area is especially galling. Remember Big Pharma accepts billions in tax credits and valuable free research, development and clinical testing by the National Institutes of Health for many important pharmaceuticals.

Is it patriotic for CEOs to continue using public services and gobs of corporate welfare while they move their corporate headquarters to a small office in the Bahamas or other tax havens to escape paying their fair share to the Treasury? Such tax escapees burden ordinary taxpayers further.

Is it patriotic for CEOs to demand and use taxpayer dollars to facilitate moving abroad with their industries? The latest version of this lack of fealty istaking large federal subsidies for solar energy research and development and then moving the production facilities to China. Andrew Grove, former CEO of Intel, has written critically of this ominous, job-draining trend.

Is it patriotic for General Motors to be saved from bankruptcy by taxpayers and still keep billions in taxpayer-paid reserves and credits, yet lobby against the Obama administration's proposed overdue safety and fuel economy standards?

In 1996, I sent letters to the CEOs of the largest hundred US chartered corporations, urging them at their annual shareholders meeting, in the name of their corporation (not their boards of directors or officers) to pledge allegiance to the flag.

For example, the CEOs would stand up, and on behalf of General Motors, DuPont, Exxon Mobil, Pfizer or Bank of America, "pledge allegiance to the flag of the United States of America and to the republic for which it stands, one nation under God, indivisible, with liberty and justice for all."

The many responses were instructive. Only Federated Department Stores thought it was a good idea. The other companies either said that they would take the suggestion under advisement or they misinterpreted my letter as asking for pledges by corporate officials and shareholders, no matter what their nationality. Ford Motor Co. flatly declared "the concept of corporate allegiance is not workable." In high dudgeon, O. George Everbach wrote back declaring "Kimberly-Clark believes that it has an inalienable right to choose when, where and how it wishes to display its patriotism."

Well at least Kimberly-Clark recognized the concept. Now it is time for American workers and taxpayers to say to corporate America that companies can't always have it both ways - to receive all the benefits of American corporate personhood and avoid all the expectations of patriotic behavior and the responsibilities that go along with those privileges and immunities.

This is not a left-right divide. For as Pat Buchanan has said, if these US corporations are not loyal to us, why should we be loyal to them?

---

Ralph Nader is a consumer advocate, lawyer and author. His most recent book - and first novel - is "Only the Super-Rich Can Save Us." His most recent work of non-fiction is "The Seventeen Traditions."

http://news.yahoo.com/special-report-little-house-secrets-great-plains-113759191.html

A little house of secrets

An unassuming home in Cheyenne, Wyoming serves as a little Cayman Island—serving as headquarters for some 2,000 companies. It belongs to a business-incorporation specialist that establishes firms which can be used as "shell" companies, paper entities able to hide assets.   Full Article 

• How two shell firms duped the military
• Video: Shells can hide shady dealings
• Deep End: Secrecy Inc. in the U.S.

Chuck Schumer's Amazing Double-Somersault on the Repatriation Holiday

Senator Schumer Supported, then Opposed, and Now Supports, Amnesty for Corporate Tax Dodgers

In 2004, Senator Charles (Chuck) Schumer of New York voted in favor of the so-called American Jobs Creation Act, a bill full of so many tax breaks for special interests that one observercalled it a “bacchanalia of Caligulan proportions.” The bill, which many Democrats and Republicans supported, prompted one business lobbyist to confess to a reporter that the policy process had “risen to a new level of sleaze.” One of the most outrageous breaks in the bill was an amnesty for corporate tax dodgers, a measure called a “repatriation holiday” by its supporters.

A second “repatriation holiday” was proposed as “economic stimulus” in 2009, but Senator Schumer, like most Senators, voted against it because of data summarized by the Congressional Research Service showing that the 2004 measure did not create jobs. In fact, the research showed that the benefits went to enrich shareholders rather than to job creation.

Now Senator Schumer has switched positions again and is supporting a second repatriation holiday.

How the Repatriation Holiday Would Help Corporations

In theory, U.S. corporations pay U.S. income taxes on their profits no matter where they are generated. But they are allowed to “defer” (not pay) U.S. taxes on their offshore profits until they bring those profits back to the U.S. (until they “repatriate” the profits), which may never happen. (A separate provision ensures that these profits are not double-taxed if taxes are paid to the foreign government.)

A tax holiday for repatriated profits would allow them to bring these profits to the U.S. and pay no taxes, or pay a very low rate. (The 2004 measure taxed offshore profits repatriated during the holiday at a nominal rate of just 5.25 percent instead of the normal 35 percent corporate income tax rate.)

Another Repatriation Holiday Will Cost the U.S. $79 Billion in Tax Revenue

According to the non-partisan Joint Committee on Taxation, a repeat of the 2004 repatriation holiday would raise some revenue during the first few years, but then reduce revenue by a larger amount over the rest of the decade, resulting in a net loss of about $79 billion over ten years.

The analysis also shows that a repatriation holiday that is slightly less generous to corporations (one taxing repatriated offshore profits at 10.5 percent) would cost about $42 billion over ten years. 

Another Repatriation Holiday Will Cost the U.S. Jobs

One factor causing the $79 billion revenue loss is the way U.S. corporations will respond when Congress shows itself willing to enact a repatriation holiday more than once. Corporations will likely shift even more profits offshore in the long-run, because corporate leaders will think they can simply wait for Congress to enact the next repatriation holiday allowing them to bring those profits back to the U.S. tax-free or almost tax-free. This means more investment will be made overseas rather than here in the U.S.

Incredibly, the coalition of companies promoting the holiday argue that it will create jobs, even though the non-partisan Congressional Research Servicefound that the 2004 measure failed to create jobs and that the benefits went instead to corporate shareholders.

The Repatriation Holiday Is an Amnesty for Corporate Tax Dodgers

Corporations would not just shift real investments (real operations and jobs) overseas. They would also respond by increasing the amount of profits they shift to offshore tax havens through sham transactions that exist only on paper. In fact, the proposal would give the greatest benefits to the worst corporate actors, those who shift profits offshore to avoid U.S. taxes.

A U.S. company that is doing real business in another country typically will reinvest those offshore profits in factories, oil wells or other assets, making it difficult to bring those profits back to the U.S. But a company that is engaging in profit-shifting (disguising U.S. profits as “foreign” profits through transactions that exist only on paper) has likely merely shifted profits to a tax haven subsidiary that consists of little more than a post office box. It’s much easier to repatriate these offshore profits than the offshore profits from real business activities. 

Also, a U.S. corporation that is doing business in a typical foreign country is already paying some tax to the foreign government, which means they can already repatriate those profits to the U.S. without paying the full 35 percent U.S. corporate income tax rate. But a U.S. corporation that has shifted its profits to a tax haven is typically paying no taxes to the tax haven government, which means they would pay the full 35 percent U.S. rate if they repatriated those profits under current law. U.S. corporations shifting their profits to tax havens therefore stand to gain the most from a repatriation holiday.

Corporate Leaders Are Divided on the Repatriation Holiday

Some corporate leaders have banded together in an extremely well-funded campaign to promote a second repatriation holiday. But other corporate leaders have decided to lobby instead for an even bigger tax giveaway. A repatriation holiday is essentially a temporary tax exemption for corporations’ offshore profits. Some corporate leaders think they can obtain a permanent tax exemption for offshore profits — a territorial tax system, in other words — and they think that enactment of a repatriation holiday would distract from that goal.

The Republican chairman of the House Ways and Means Committee, Dave Camp, agrees with the corporate leaders who prefer a territorial system (the bigger tax giveaway) to a repatriation holiday. But he has not ruled anything out.

Photo via Pro Publica Creative Commons Attribution License 2.0

Categories:

 

• Offshore Tax Abuses,
 
• Tax Avoidance, Tax Evasion, and Tax Enforcement,
 
• Tax Giveaways for Corporations

3. Just Google tax haven - Stuff reports Google paid just NZ$230,000 of tax in New Zealand last year despite taking in well over NZ$150 million in revenues. I reckon Google's NZ revenues are actually closer to NZ$200 million.

When is the government going to crack down on Google's use of an Irish tax haven? It also doesn't pay GST.

This raises questions about the shift of many services into the 'cloud'. Where is it taxed? Is this a whole new part of the economy (accounting, legal services, advertising, media) that is about to be internationalised and taken out of the non-tradeable economy?

Google's income tax expense for 2009 before the extra payment was $40,000, but that falls to $7726 once a deferred tax deduction for the year is factored in. The subsidiary has total deferred tax assets, which can be used to offset future tax bills, of $103,801.

Google's commission model was criticised last year, after Bloomberg reported it was paying a tax rate of just 2.4 per cent on billions of dollars of profits earned outside the United States.

Inland Revenue hinted it might take action, saying its "general anti-avoidance provision" could apply to "treaty shopping situations, where transactions were merely routed through a particular jurisdiction by way of a conduit entity and lack commercial substance".

US Uncut, Yes Men to Bust Corporate Tax Dodgers in Cayman Islands

Allison Kilkenny

June 10, 2011 

The activism groups behind a widely circulated (and false) AP report stating GE would return its entire 2010 tax refund of $3.2 billion to the US Treasury appear to be getting the band back together. US Uncut and The Yes Men are planning another event to draw attention to the massive problem of corporate tax dodging, but this time they’re taking their activism directly to the source of America’s lost revenue: the Cayman Islands.

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Cayman Islands Obama

The groups have posted a Kickstarter account to help raise $10,000 by June 30 in order to fund the fact-finding mission.

US Uncut expresses the purpose for the quest:

In order to understand why thousands of teachers are losing their jobs across the country, we set out to discover where the leak was in Uncle Sam's revenue bucket. In Washington, we found myriad lobbying groups and politicians bickering about tax repatriation holidays, negative corporate tax rates and comprehensive tax reform. Oh my! But nobody could explain where the money went, and how to get it home?

Nearly exhausted, we were about to throw in the beach towel when a sign came—in the form of a palm tree. Could it be that all the money is just a few tropical waves south of Key West? Sitting in off-shore bank accounts, just waiting to be brought back to share with eager shareholders and upstanding citizens alike?

“After the fun we had with GE, we wanted to do something bigger, to really strike at the heart of tax dodging," says US Uncut founder Carl Gibson, “The central problem of this whole thing is a system that allows companies to dodge nearly all of their tax obligations by registering, for example, two inches of space at an office building in the Caymans as an ‘international corporate headquarters.’ ”

The project is focused on embarrassing some of the more well-known companies participating in the Win America Campaign, which was also the group’s reasoning behind its recent protests against Apple, a big supporter of WAC.

“WAC lobbyists use language soaked in faux patriotism about how the money is ‘trapped overseas’ and the need to ‘bring the money home,'” says Gibson. “Well, we're doing it for them. If our tax dollars are being held hostage in the Cayman Islands, then there should be a ragtag group of taxpaying citizens ready to swoop in and bring it home. And that's what we plan to do.”

US Uncut plans to use the 10 large on a film crew and flights, and the group has certainly targeted the right place.Author Nicholas Shaxson, one of the predominant experts on the problem of tax dodging, says the United States loses an estimated $100 billion every year because of these tax havens, and the Cayman Islands harbors one of the biggest pools of illicit cash.

President Obama himself called the Cayman Islands operation “the biggest tax scam on record.” One of Obama’s stock applause lines was a true-life story he would tell about a single building in the Cayman Islands which houses 12,000 corporations. "That's either the biggest building,” then-Senator Obama would say, “or the biggest tax scam on record.” Cue wild applause.

The building Obama was referring to is called the Ugland House in George Town, and it actually houses about19,000 registered companies.

In the Caymans, huge multibillion-dollar corporations pay a measly $3,000 annual fee for the privilege of avoiding contributing back to a society that simultaneously showers the top echelon of businesses with more and morecorporate tax cuts. This is the equivalent of a mugging victim then marching to an ATM to doll out a stack of twenties to their assailant.

Since being elected, however, President Obama has done little to stem the problem of corporate tax havens. Back in 2008, Carl Levin crafted the Stop Tax Haven Abuse Act, legislation then-Senator Obama threw his support behind, and which has, like most bills that make sense, been floating in purgatory ever since.

This theft isn’t just hard on citizens who are struggling to survive in a country with shrinking revenue, but also on legitimate businesses that do pay their fair share in taxes. Quite simply: tax dodging is bad for American businesses, too, which can never hope to compete with the sweet deals multinational corporations enjoy with their partners, the US government.

Legislative paralysis is precisely why US Uncut and The Yes Men are planning this action to draw the American people’s attention back to the problem of tax dodging. The groups hope to remind President Obama that the reason his applause lines were so popular is because Americans are enraged by the unscrupulous tax dodging practices of big US corporations.

Like this blog post? Read it on The Nation’s free iPhone App, NationNow.

Tax Shell Game: CALPIRG

To download this excellent report:
http://cdn.publicinterestnetwork.org/assets/8d6563bacda5780aa608fa3991994d35/Toward-Common-Ground_Final-Report-2.pdf

2011-04-15

Executive Summary

Tax havens are countries with minimal or no taxes, to which U.S.-based multinational firms or individuals transfer their earnings to avoid paying taxes in the United States. Users of tax havens benefit from access to America’s markets, workforce, infrastructure and security, but pay little or nothing for it—violating the basic fairness of the tax system.

Abuse of tax havens inflicts a price on other American taxpayers, who must pay higher taxes—now or in the future—to cover the government’s revenue shortfall, or must deal with cuts in government services.

The United States loses approximately $100 billion in tax revenues every year due to corporations and individuals sending their money to offshore tax havens.
•    Residents of California paid $440 to make up for the taxes that are avoided by corporations and wealthy individuals through the use of offshore tax havens.
•    In 2010, making up for this lost revenue cost the average U.S. tax filer $434. That’s enough money to feed a family of four for three weeks.

Some of America’s biggest companies—including many who have taken advantage of government bailouts or rely on government contracts—use tax havens. As of 2008, 83 of the 100 largest publicly traded U.S. corporations maintain revenues in offshore tax haven countries.
•    Goldman Sachs, which reported more than $2 billion in profit in 2008, was able to use its 29 tax haven subsidiaries to reduce its federal tax bill to just $14 million. That means that Goldman Sachs’ CEO Lloyd Blankfein, who made $42.9 million that year, earned more than three times the amount that the company paid in federal taxes.
•    General Electric appears to have paid no federal income taxes in 2010, despite reporting profits in the United States of $5.1 billion. The biggest company in the country, GE has lobbied hard for tax breaks and loopholes in the federal tax code, and shifted many of its profits to tax havens to avoid paying U.S. taxes. GE employs nearly 1,000 people in its tax department to help exploit those loopholes, but has laid off one-fifth of its U.S.-based workers since 2002.

To restore fairness to the tax system by preventing corporations and wealthy individuals from avoiding taxes through the use of tax havens, policymakers should:
•    End the ability of U.S. multinational corporations to indefinitely defer paying U.S. tax on their profits. U.S. corporations should pay taxes immediately on profits from U.S. business that companies attribute to their foreign entities, rather than wait until they someday bring the money back to the United States. The United States should not adopt a “territorial” system under which companies temporarily move profits and pay taxes in tax haven countries and then freely bring them back tax-free to the United States.
•    Expand rules against money laundering to cover those who aid and abet. The rules should include lawyers who set up shell companies, hedge fund managers who set up anonymous accounts, and others who help taxpayers avoid tax laws.
•    Increase the penalties and strengthen rules related to offshore tax shelters, including prohibiting tax strategy patents and fees contingent on obtaining tax benefits.
•    Revise tax treaties to enhance sharing of tax information between countries to include the real names of account owners.
•    Require multinational corporations to report financial statements on a country-by-country basis.
•    Close loopholes that allow tax credits from other countries to count against U.S. tax liability.
•    End the ability of U.S. multinational companies to apply tax deductions related to foreign income to U.S. income.
•    Eliminate the incentive for U.S. companies to transfer intellectual property (e.g. patents, trademarks) to tax haven countries for artificially low prices and then pay inflated royalties to use them in the United States. This manipulation masks what would otherwise be U.S. taxable income.
•    Stop the ability of multinational companies to manipulate how they define their corporate status to minimize their taxes, including the ability to represent themselves as different types of corporations to different countries.
•    Treat foreign corporations as U.S. domestic companies if they are managed and controlled in the United States.
•    Increase IRS resources to combat transfer pricing and tax haven abuses.

TAX HEADLINES - Citizens for Tax Justice

Corporate Interests Push Congress to Exempt Offshore Profits Permanently (Territorial System) or Temporarily (Repatriation Holiday)

Republican House Ways and Means Committee Chairman Dave Camp called the Chief Financial Officers of four different corporations to testify in favor of a “territorial” tax system on Thursday. A territorial system exempts offshore profits of U.S. corporations from U.S. taxes... Some corporate leaders have argued that if Congress does not permanently exempt their offshore profits, then lawmakers should temporarily exempt them with the sort of tax holiday for repatriated corporate profits that Congress enacted in 2004...
Read More

Three Republicans and Three Democrats Introduce Amnesty for Corporate Tax Dodgers

On Wednesday, Rep. Kevin Brady (R-TX) introduced a bill (H.R. 1834) to provide a tax holiday for corporations that repatriate offshore profits, similar to the widely panned repatriation holiday enacted in 2004. The holiday is essentially a temporary tax exemption for corporate offshore profits, which some corporate leaders see as a second best alternative to a permanent exemption... Brady’s bill has five co-sponsors, and the three Democrats among them are likely to receive the most attention. The three Democrats have a history of opposing fair and responsible taxes...
Read More

Microsoft-Skype Deal Shows Need for a True Worldwide Corporate Tax

Microsoft’s purchase of Skype for $8.5 billion provides a perfect illustration of why adopting a true worldwide corporate income tax system is critical to our economic future. According to the Wall Street Journal, the cash for Microsoft’s purchase of Skype (a Luxembourg-based company) will come out of its $42 billion in liquid assets held in foreign subsidiaries...
Read More

Hawaii Passes Budget Limiting Upside-Down Tax Giveaways

Last week the Hawaii legislature sent Governor Neil Abercrombie a package of tax changes designed to help close the state’s yawning budget gap.  Among its most notable components are the partial repeal of the state’s nonsensical deduction for state income taxes paid, and a new limitation on itemized deductions taken by wealthy taxpayers.  Both of these changes will help mitigate the upside-down, regressive nature of Hawaii’s itemized deductions — a move that ITEP has urged many states to consider...
Read More

Massive Business Tax Cuts Coming to Michigan, but EITC is Saved at Last Minute

For months, Governor Rick Snyder has been trying desperately to enact massive business tax cuts paid for with new taxes on pension income and the elimination of the Earned Income Tax Credit (EITC).  Unfortunately, a modified version of Snyder’s plan passed both houses of the state legislature yesterday and is now on its way to the Governor’s desk, where it will soon be signed into law.  In a bit of good news, however, the excellent advocacy work done by the Michigan League for Human Services (MLHS) and others ultimately resulted in the EITC being spared from complete elimination — though it has been scaled back by some seventy percent...
Read More

Colorado Repeals Tax Loophole that Made Tom Cruise a "Farmer"

The agricultural property tax loophole we first told you about in March was closed on Monday when Gov. John Hickenlooper signed HB1146.  Tom Cruise was among the most famous beneficiaries of the loophole, saving thousands of dollars in taxes because of his decision to allow sheep to “graze around the mansions for brief periods each year.”  At this point, it remains unclear whether this new law will cause farmer Cruise to put away his shears and focus on his acting career...
Read More

New ITEP Report: States Should Look to Connecticut on Tax Policy

Earlier this week, the Institute on Taxation and Economic Policy released a new report highlighting the key tax components of Connecticut’s recently enacted budget, which raised more than $1.4 billion in new taxes to mitigate cuts to core services...
Read More

Rhode Island Considers Progressive Approach

Rhode Island remains one of a handful of states seriously considering revenue increases to help address significant state budget shortfalls... Last week, an alternative revenue-raising plan emerged.  Representative Larry Valencia filed a bill for a temporary personal income tax surcharge of 4.1 percent on the state’s wealthiest residents, which would raise around $130 million...

Read More

Can Georgia's Tax Reformers Overcome Grover Norquist?

Just weeks after a six-month effort by Georgia lawmakers to enact ambitious tax reform legislation fell apart, Governor Nathan Deal is signaling that lawmakers may be asked to continue their deliberations on this issue when they return for a special legislative session on redistricting this August. But if Deal's views on the shape of "tax reform" are any indicator, a special session could run into the same difficulties encountered during this year's tumultuous regular legislative session...
Read More

Nevada Considers Sales Tax Reform

Recognizing the dire fiscal straits faced by the state, Democratic lawmakers in Nevada are pushing for a $1.5 billion plan to reform the sales tax to raise revenue and avoid harsh cuts in public services. One of the smartest parts of the plan would raise roughly $600 million in new revenues by expanding the state’s sales tax base to include services...
Read More

 

SPEAKER BOEHNER CALLS FOR "TERRITORIAL" TAX SYSTEM; WOULD EXEMPT CORPORATE PROFITS SHIFTED OFFSHORE

Addressing the Economic Club of New York on Monday, Republican House Speaker John Boehner told reporters that Congress should be “looking seriously at a territorial tax code,” according to CQ Today.

Under a territorial system, the offshore profits of a U.S. corporation would be exempt from U.S. taxes.

A recent report from Citizens for Tax Justice explained that this would cause serious problems.

First, corporations would have a greater incentive to engage in profit-shifting, meaning practices used to disguise U.S. profits as foreign profits. A common example is the manipulation of transfer pricing to shift corporate profits into tax havens (countries that do not tax, or that barely tax, certain types of profits).

Second, corporations would have a greater incentive to shift actual operations — and jobs — to other countries.

Our current system already encourages these practices because U.S. corporations are allowed to “defer” their U.S. taxes on their offshore profits. But the incentives would be even greater under a territorial system, in which corporations would NEVER pay U.S. taxes on their offshore profits.

Other countries that have adopted territorial tax systems are experiencing these problems, and the European Union is considering adoption of a different system to allocate profits among EU member states.

As CTJ’s report explains, the best alternative would be for Congress to repeal the rule allowing U.S. corporations to “defer” their U.S. taxes on offshore profits. Corporations could continue to get a credit for any taxes paid to a foreign government (just as they do now) which prevents any profits from being taxed more than once.

Possible Amnesty for Corporate Tax Dodgers

Some corporate leaders have argued that if Congress does not permanently exempt their offshore profits, then lawmakers should temporarily exempt them with the sort of tax holiday for repatriated corporate profits that Congress enacted in 2004. Boehner expressed openness to this idea on Monday.

Several studies of the 2004 effort showed the repatriated profits went to shareholders and not to job-creation, despite the promises made by corporate lobbyists. An economist with the U.S. Chamber of Commerce recently admitted that any attempt by Congress to attach job-creation requirements to the tax holiday simply will not work.

Read more about the proposed repatriation tax holiday.


Calls for Slashing Public Services, But No Revenue Increase from Profitable Corporations

Speaker Boehner also said that the corporate tax should be reformed but should not raise any more revenue than it does today. This came during a speech in which Boehner demanded that “trillions” be cut from public services — a goal that would be impossible without sharply cutting Social Security, Medicare, and Medicaid — but refused to consider any revenue increases.

A recent report from CTJ explains why corporate tax reform should be “revenue-positive,” meaning we should raise more tax revenue from corporations than we do today.

Almost two-hundred organizations have signed onto a letter urging Congress to adopt a revenue-positive corporate tax reform.

The letter notes that a 2007 report from President Bush’s Treasury Department found that the share of profits paid in taxes is lower for U.S. corporations than the average for OECD countries.

Sign your organization onto the letter urging Congress to raise revenue by reforming the corporate tax. (Deadline: End of Friday)

Send a letter on your own behalf urging Congress to raise revenue by reforming the corporate tax.

Report: Offshore tax havens cost U.S. $100B - CBS News

Goldman Sachs is reportedly among the many offenders when it comes to large corporations sheltering their fortunes from the IRS in overseas tax havens.

 (Credit: Mario Tama/Getty Images)

Adding insult to injury on the day American taxpayers are due to file their returns, a new report by the U.S. Public Interest Research Group states that many of the biggest U.S. companies who took advantage of government bailouts or rely on government contracts regularly hide their money from the IRS in overseas tax havens.

Overall, the U.S. loses approximately $100 billion in tax revenues every year as corporations and individuals shelter their fortunes in foreign bank accounts.

In 2009, President Barack Obama launched a major initiative against overseas tax havens with new tax laws, new reporting requirements and an army of 800 new IRS agents.

"I want to see our companies remain the most competitive in the world. But the way to make sure that happens is not to reward our companies for moving jobs off our shores or transferring profits to overseas tax havens," Mr. Obama said at the time, according to the Washington Post.

However, today's report by U.S. PIRG reveals that the president still has a long way to go.

Some of the report's key findings include:

• In 2010, making up for this lost revenue cost the average U.S. tax filer $434. That's enough money to feed a family of four for three weeks.
• The taxpayers who pick up the largest share of the tab live in Delaware and New Jersey. On average, tax filers in those states paid an additional $920 and $752, respectively.
• Some of America's biggest companies - including many that have taken advantage of government bailouts or rely on government contracts - use tax havens. As of 2008, 83 of the 100 largest publicly-traded U.S. corporations maintain revenues in offshore tax haven countries.
• Goldman Sachs, which reported more than $2 billion in profit in 2008, was able to use its 29 tax haven subsidiaries to reduce its federal tax bill to just $14 million. That means that Goldman Sachs' CEO Lloyd Blankfein, who made $42.9 million that year, earned more than three times the amount that the company paid in federal taxes.
• General Electric appears to have paid no federal income taxes in 2010, despite reporting profits in the United States of $5.1 billion. The biggest company in the country, GE has lobbied hard for tax breaks and loopholes in the federal tax code, and shifted many of its profits to tax havens to avoid paying U.S. taxes. GE employs nearly 1,000 people in its tax department to help exploit those loopholes, but has laid off one-fifth of its U.S.-based workers since 2002.

Click on the video player below to watch a recent "60 Minutes" report by Lesley Stahl on tax havens.

http://www.cbsnews.com/8301-503983_162-20054892-503983.html