Major US companies ‘hold $2.1tn offshore’

The 500 largest US companies hold more than $2.1trn (€1.87trn) in accumulated profits offshore to avoid US taxes and would collectively owe an estimated $620bn in US taxes if they repatriated the funds, according to a study released yesterday.

Major US companies ‘hold $2.1tn offshore’

The study, by two left-leaning non-profit groups, found nearly three quarters of the firms on the Fortune 500 list of biggest US companies by gross revenue operate tax haven subsidiaries in countries such as Bermuda, Ireland, Luxembourg, and the Netherlands.

The Citizens for Tax Justice and the US Public Interest Research Group Education Fund used the companies’ own financial filings with the Securities and Exchange Commission to reach their conclusions.

Technology firm Apple was holding $181.1bn offshore, more than any other US company, and would owe an estimated $59.2bn in US taxes if it tried to bring the money back to the US from its three overseas tax havens, the study said.

The conglomerate General Electric has booked $119bn offshore in 18 tax havens, software firm Microsoft is holding $108.3bn in five tax haven subsidiaries, and drug company Pfizer is holding $74bn in 151 subsidiaries.

“At least 358 companies, nearly 72% of the Fortune 500, operate subsidiaries in tax haven jurisdictions as of the end of 2014,” the study said.

“All told these 358 companies maintain at least 7,622 tax haven subsidiaries.”

Fortune 500 companies hold more than $2.1tn in accumulated profits offshore to avoid taxes, with just 30 of the firms accounting for $1.4trn of that amount, or 65%, the study found.

Fifty-seven of the companies disclosed they would expect to pay a combined $184.4bn in additional US taxes if their profits were not held offshore.

Their filings indicated they were paying about 6% in taxes overseas, compared to a 35% US corporate tax rate, it said.

“Congress can and should take strong action to prevent corporations from using offshore tax havens, which in turn would restore basic fairness to the tax system, reduce the deficit and improve the functioning of markets,” the study concluded.

Following two years of constant meetings between tax experts from its 34 country members, the OECD on Monday released the second half of its 15-point action plan on combating base erosion and profit-shifting.

Heralded as the most ambitious and fundamental change to international tax rules in almost a century, it was first mandated by the G20 countries in 2012 as electorates in developed nations responded in anger to the ability of large corporations to avoid paying tax.

The OECD report focused on regimes that allow profits to be geographically divorced from the activities that create them, both of which Ireland has been addressing.

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