The top 500 US companies retained $620 billion that would have otherwise been taxed and spent by the government by using overseas bank accounts, according to a report from Citizens for Tax Justice and the US Public Interest Research Group Education Fund.
“At least 358 companies, nearly 72 percent of the Fortune 500, operate subsidiaries in tax haven jurisdictions as of the end of 2014,” the report states. In total, the 500 companies keep about $2.1 trillion in tax havens outside the US, most often in Bermuda or the Cayman Islands.
So-called “offshore” profits often don’t leave the US economy, however. The money is still circulating within America, just under the name of a registered foreign subsidiary of a US company. The report’s conclusion is that the real problem lies in too many loopholes resulting in too little government revenue.
“There are clear policy solutions that lawmakers can enact to crack down on tax haven abuse. They should end the incentives for companies to shift profits offshore, close the most egregious offshore loopholes and increase transparency,” the report recommends.
A bipartisan bill in Congress would lower the corporate tax rate from 35 percent to 6.75 percent for a five-year period, enticing companies to return their funds from the tax havens. Senators Barbara Boxer (D-California) and Rand Paul (R-Kentucky) are co-sponsors of the Invest in Transportation Act of 2015, which would send the taxes collected to the Highway Trust Fund.
The bill, which was introduced in January, hasn’t passed the Senate though, amidst skepticism that, as a “tax holiday,” it would constitute irresponsible budgeting, and President Obama isn’t expected to support a tax cut on large corporations.
However, a study by the New Democrat Network said the bill could add $68.9 billion to the Highway Trust Fund.
This piece was reprinted by RINF Alternative News with permission or license.