US-based multinationals have "dodged billions of
dollars in taxes by shifting profits to low-tax jurisdictions overseas, and have
used loopholes in the law to avoid taxes on repatriated income that should be
subject to taxation," information uncovered by the US Senate Permanent
Subcommittee on Investigations was revealed last September. The year long
investigation is now reported to be close to conclusion.
“Major US corporations are increasingly earning their profits here but shipping
them overseas to avoid paying the taxes they owe,” Senator Carl Levin, the
subcommittee chairman, said in September. “At a time when we face such
difficult budget choices, and when American families are facing a tax increase
and cuts in critical programs from education to health care to food inspections
to national defense, these offshore schemes are unacceptable."
The subcommittee highlighted case studies of
offshore tax avoidance schemes by Microsoft and Hewlett-Packard at a hearing
which sought to show "how wealthy individuals and multinational corporations use
offshore tax schemes to dodge paying the taxes they owe. The hearing showed how
corporations use weaknesses in tax law concerning “transfer pricing”- -
"the shifting of property from a US parent company to overseas subsidiaries - -
and other loopholes in tax law and accounting rules to earn substantial US
profits without paying substantial US taxes."
The subcommittee said in a statement that "tax
avoidance has helped push corporate income tax revenue, as a share of all
federal revenue, to historically low levels, meaning corporations bear a much
smaller share of the tax burden, leaving more for American families to carry.
According to the Congressional Research Service, the share of corporate income
taxes has fallen from a high of 32.1% of federal tax revenue in 1952 to just
8.9% in 2009. Meanwhile, payroll taxes -- which almost every income earner,
rich, middle-income and poor, must pay - - have skyrocketed from 9.7% of federal
revenue to 40%."
In fiscal year 2011 which ended on September 30,
2011, the US effective corporate tax rate on domestic profits fell to 12.1%
- - the lowest since 1972 and well below the 25% companies paid on average
from 1987 to 2008. The low rate reflected accelerated investment writoffs that
were introduced during the recession.
US corporate taxes were above 6% of GDP in the early 1950s but since the early
1980s have averaged about 2%.
Finfacts, Sept 2012:
US Senate panel slams Microsoft's 'tax gimmickry' in Ireland,
Singapore and Puerto Rico
The New York
reports today: "The Senate Permanent Subcommittee
on Investigations inquiry now drawing to a close began more than a year ago and
involves at least a half dozen technology companies, according to people with
firsthand knowledge of it, who declined to be identified.
Those people said the
subcommittee had subpoenaed or otherwise asked the companies to explain methods
they used to avoid domestic taxes. They said Apple had become a focus of the
inquiry and was cooperating with the subcommittee, which is expected to issue
wide-ranging recommendations that are likely to play a significant role in
Congressional tax code negotiations.
Apple’s domestic tax bill
has drawn the interest of corporate tax experts and policy makers because
although the majority of Apple’s executives, product designers, marketers,
employees, research and development operations and retail stores are in the
United States, in the past Apple’s accountants have found legal ways to allocate
about 70% of the company’s profits overseas, where tax rates are often
much lower, according to corporate filings."
The newspaper says that the subcommittee is also known to be looking at Google, Hewlett-Packard, Microsoft and firms in such fields as biotechnology.
The NYT adds: "Although
technology is now one of the nation’s largest and most highly valued industries,
many tech companies are among the least taxed, according to government and
corporate data. Over the last two years, the 71 technology companies in the
Standard & Poor’s 500-stock index — including Apple, Google, Yahoo and Dell —
reported paying worldwide cash taxes at a rate that, on average, was a third
less than other S& P companies’, according to a New York Times analysis. (Cash
taxes may include payments for multiple years.)"
Irish Economy: Sustainable growth dependent on
foreign firms since 1990; Now FDI has peaked
Irish Economy: Pharmaceutical
patent cliff no growth threat; High exports have low impact
Irish Economy: Export growth
insufficient to pull domestic economy out of recession
Irish Economy 2012: At least a third of value of
Irish services exports is overstated
Dell remains Ireland's biggest manufacturing exporter despite closing Limerick
Irish Economy 2012: Only 50,000 Irish direct
workers responsible for 69% of annual Irish exports
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