American Fortune 500 corporations are cheating Americans out of about $550 billion by holding nearly $2 trillion of profits offshore.
While congressional hearings over the past few years have focused attention on the tax avoidance strategies of technology corporations like Apple and Microsoft, this report shows that a diverse array of companies are using offshore tax havens, including U.S. Steel, the pharmaceutical giant Eli Lilly, the apparel manufacturer Nike, the supermarket chain Safeway, the financial firm American Express, and banking giants Bank of America and Wells Fargo.
The practice is legal, but grossly unfair, according to progressive activists who have been demanding reforms.
A total of 301 Fortune 500 corporations have disclosed, in their most recent financial reports, holding some of their income as “permanently reinvested” offshore profits. At the end of 2013, these permanently reinvested earnings totaled a whopping $1.95 trillion.
Yet the vast majority of these companies — 243 out of 301 —decline to disclose the U.S. tax rate they would pay if these offshore profits were repatriated, while 58 corporations disclose this information.
The non-disclosing companies collectively hold $1.4 trillion in unrepatriated offshore profits at the end of 2013.
Accounting standards require publicly held companies to disclose the U.S. tax they would pay upon repatriation of their offshore profits — but these standards also provide a loophole allowing companies to assert that calculating this tax liability is “not practicable.”
Almost all of the 243 non-disclosing companies use this loophole to avoid disclosing their likely tax rates upon repatriation — even though these companies almost certainly have the capacity to estimate these liabilities.
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