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Entries tagged "Tax Havens"

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The Dirt on Fix the Debt's Advocacy of a Territorial Tax System

June 17, 2013 ·

On June 12, 2013, the Institute for Policy Studies released the sixth in a series of reports on the Fix the Debt corporate lobby group. This newest report, Corporate Pirates of the Caribbean, uses Fix the Debt members’ SEC filings to calculate how much they would stand to gain from a shift to a territorial tax system. Such a reform would permanently exempt U.S. corporations’ foreign earnings from U.S. income taxes.

In response to this IPS report, Fix the Debt issued a press release denying that they have ever taken a position on this controversial tax reform and spokeswoman Maya MacGuineas described the report as “lies and mudslinging.”

These attacks on our research conflict with clear statements in support of a territorial tax system, both by Fix the Debt directly and by numerous Fix the Debt leaders.

As we pointed out in our first report, published in November 2012, Fix the Debt expressed unambiguous support for a territorial tax system in a PowerPoint on their web site (see slide 11). The PowerPoint was described as a “CEO Tool” to help business leaders recruit others to join Fix the Debt. This IPS report, The CEO Campaign to “Fix” the Debt: A Trojan Horse for Massive Corporate Tax Breaks, received significant coverage in the mainstream and alternative press.

More than six months later, with this same PowerPoint still on their web site, Fix the Debt is claiming they have never had a position on a territorial tax system. And even though we reprinted the slide in our new report, Fix the Debt spokespeople did not address this obvious inconsistency.

Support for territorial tax reform is a core plank of the fiscal reform plan articulated by Fix the Debt Co-Chairs Erskine Bowles and Alan Simpson. In April 2013, Fix the Debt prominently featured Bowles-Simpson 2.0 on their website. In their piece applauding the new Simpson-Bowles plan, Fix the Debt includes “move toward a territorial system” as one of five key components of the plan.

Our plan puts in place a process for comprehensive tax reform to eliminate or scale back tax expenditures in order to generate nearly $600 billion in revenues for deficit reduction substantially reducing marginal tax rates for individuals, corporations and small business, and moving toward a competitive territorial system while maintaining the progressivity of the tax code.

Excerpted from A Bi-Partisan Path Forward to Securing America’s Future, (aka Bowles-Simpson 2.0) Moment of Truth Project; April 2013, p 7.

Other prominent Fix the Debt leaders have also been vocal in their support of a territorial tax system for corporations:

“We shouldn’t be imperiling U.S. companies to be competitive with our foreign competitors by putting in a tax policy that puts them at a disadvantage. So, I’m very much in favor of a territorial system and that’s what we advocated in Simpson-Bowles."
- David Cote, CEO of Honeywell, CEO Fix the Debt Steering Committee member and Member of the Simpson-Bowles Deficit Reduction Commission, Bloomberg Street Sense, August 27, 2012

The U.S. needs to "allow this territorial system [excusing repatriated profits from being subject to domestic taxes] so that companies can repatriate their earning back to the United States."
- Jeffrey Immelt, CEO of General Electric, Fix the Debt CEO Steering Committee member, exclusive interview with CNN, October 4, 2012

We need comprehensive business tax reform that will lower tax rates and provide certainty for all businesses. We also need to move to a competitive territorial tax system in line with other major industrialized nations.”
- Doug Oberhelman, CEO of Caterpillar, Fix the Debt CEO Steering Committee (with Mary Andringa), op-ed in Roll Call, June 6, 2012

“Tax policy: I think the President's put out some really good suggestions, but we've got to get to the territorial tax.”
- Andrew Liveris, Chairman Dow Chemical, Fix the Debt CEO Steering Committee member, Kudlow Report, CNBC, April 19, 2012

One of the things that's always bothered me is that we don't have a territorial tax system.”
- Paul Jacobs, CEO of Qualcomm, Fix the Debt CEO Steering Committee member, USA Today, May 20, 2013

The Fix the Debt campaign appears to be facing a dilemma.

On the one hand, they seem to be trying to recruit and maintain CEO supporters by creating a platform for promoting policies that would primarily benefit large corporations. On the other hand, they are trying to build broad public support through slick PR gimmicks emphasizing a message of shared sacrifice.

Rather than attacking IPS research, they may want to focus on resolving these inconsistencies.

Tax-Haven Abuse Film Hits the Fast Lane

January 26, 2012 ·

(Park City, Utah) — "We're Not Broke," a lively documentary about the ways that wealthy individuals and global corporations dodge taxes, had its world premiere on Sunday at the Sundance Film Festival.

We Are Not Broke film stillThe timing couldn't have been more extraordinary. Just two days earlier, the Associated Press reported that Republican presidential candidate Mitt Romney has up to $32 million in offshore bank accounts, mostly in the Cayman Islands. Two days after the film's debut, Romney bowed to mounting pressure and released his damning 2010 and 2011 tax returns, and President Barack Obama called for a new mandatory 30 percent tax rate on Americans earning $1 million or more each year.

Directed by Karin Hayes and Victoria Bruce, "We're Not Broke" visually and expertly explains how "offshore "banking enables the richest 1 percent and several thousand transnational corporations to avoid regulation, taxes, and accountability.  

Unlike other documentaries about corporate abuses, "We’re Not Broke" inspires viewers to see themselves as agents of change. The film stands out in is its portrayal of ordinary people learning about the offshore system and taking action. It profiles the emergence of US Uncut, and follows how its activists engage in direct action at Bank of America, Verizon, Apple, and other tax dodgers.

There are an estimated 60 tax havens — formally called "secrecy jurisdictions" — around the globe. The countries have loose incorporation rules, bank reporting standards, and financial transparency requirements. People in the U.S. are more aware of Caribbean tax havens such the Cayman Islands, Bermuda, and the Bahamas. But technology and pharmacy companies often create subsidiaries in countries like Ireland and the Netherlands to hold patents and intellectual property to reduce their U.S. tax bills.

The offshore system has spawned a gigantic tax avoidance industry, with teams of lawyers and accountants who add nothing to the efficiency of markets or products. In 2011, reports about General Electric's storied tax dodging dramatized the ways that modern multinationals view their tax accounting departments as profit centers.

At a time when federal and state lawmakers are grappling with huge budget deficits, the impact of corporate tax dodging is getting new attention. Tax havens are costing us more than an estimated $100 billion of lost revenue each year. And a coalition of over 20 U.S. companies have launched their "WIN America" campaign to lobby for a "tax holiday" on $1.2 trillion in overseas profits they want to bring back to the U.S. without paying the back taxes they owe.

"We're Not Broke" portrays the "business case" for closing down the off shore system with profiles of several small business people who are at a competitive disadvantage with global corporate tax dodgers.

The documentary will probably figure into the election debate, given how Obama used his State of the Union address to highlight the tax system's deep inequities in the. If Mitt Romney nails the GOP nomination, the abuses of the offshore system will draw plenty of attention.

Romney's spokespeople argued the candidate was pursuing normal tax reduction schemes. But the offshore system is a rigged game, benefiting a small handful in the 1 percent of wealth holders and a few thousand global corporations. "It may be legal, but these are loopholes that show problems in our tax code," said Nicole Tichon, executive director of Tax Justice Network USA, an organization that promotes tax transparency. "The bottom line is, they're taking advantage of a system that's flawed."

Stay tuned for more information about how you can see, "We're Not Broke." In the meantime, visit the documentary's web site. werenotbrokemovie.com

Chuck Collins, co-author of the Institute for Policy Studies report, America Loses: Corporations that Take Tax Holidays Slash Jobs, is a featured expert in "We're Not Broke." www.ips-dc.org

When IPS and the Heritage Foundation Agree that Something's a Bad Idea, It Probably Does Stink

October 5, 2011 ·

Sens. Kay Hagan (D-NC) and John McCain (R-AZ) have announced plans to introduce a bill tomorrow that would let U.S. companies bring home as much as $1.4 trillion of overseas profits at a steeply reduced tax rate.

However, a new report by the Institute for Policy Studies says this proposed corporate "tax holiday" is unlikely to spur any net job growth. Surprisingly, IPS released its report almost simultaneously with a new paper from the conservative Heritage Foundation that draws the identical conclusion. Tax holidays don't create jobs.

"When Heritage and IPS, two think tanks on opposite ends of the political spectrum, actually agree on something, policymakers should take notice," said Sarah Anderson, a co-author of America Loses: Corporations that Take 'Tax Holidays' Slash Jobs, the new IPS report. "Our solutions to the problem are polar opposites — we want corporations to pay the full existing tax rate while Heritage wants to permanently lower them. But we welcome their honest assessment that the proposed tax holiday will not create jobs."

America Loses shows that most of the companies that snagged a big tax break in 2004, the last time Congress gave them this kind of deal, actually reduced their national and global workforces.

In fact, 58 of the large corporations that took tax holidays after the 2004 congressional action went on to shed almost 600,000 workers. This downsizing didn't stem from recession-linked red ink. These 58 companies today maintain combined cash reserves of more than $450 billion.

Take Action: Tell Your Member of Congress "No Corporate Tax Holidays"

Emily Schwartz Greco is the managing editor of OtherWords, the Institute's national non-profit editorial service.

Uncle Sam Should Support Built-to-Last Companies, Not Built-to-Loot Enterprises

October 4, 2011 ·

A powerful coalition of U.S.-based global companies is lobbying hard for a "tax holiday" on offshore profits.

Companies like Google, Apple, Pfizer, and General Electric have parked huge amounts of profits — a stash totaling more than $1.4 trillion —in offshore tax havens. They've stowed those funds abroad primarily to avoid having to pay federal taxes on that income.

But now they want to bring their treasure to the United States, albeit at a steep discount on what they owe the IRS. Instead of paying the statutory corporate income tax rate of 35 percent — or even the "effective rate," which for most global companies, is closer to 11 percent — they're urging Congress to let them do this at a tax rate that's a whisker over 5 percent.

When they say WIN America, they mean cheat America. Flickr photo by David_Shankbone.They tell Congress they need a "tax holiday" to free up badly needed capital to invest in right here — creating jobs at a time when the U.S. economy is sputtering.

They've formed a lobby front called the WIN America coalition to make their case, spending over $50 million and hiring over 42 lobbyists that previously worked as staffers on select Congressional tax writing committees. Most GOP members would support any tax cut, even in their sleep, so WIN America has focused its lobbying firepower on Democratic members.

The coalition's corporate lobbyists argue this would be a win-win stimulus for the economy and a low-cost way to growth and jobs that both Republicans and Democrats could support.

The problem with these WIN America promises is this: Their pants are on fire. Here's how we know that: They waged the same campaign in 2004 with the same promises that they would create jobs, got their way, and created few jobs. Worse, some companies destroyed tens of thousands of jobs.

According to a new report that I co-authored, America Loses: Corporations That Tax Holidays Slash Jobs, most of the companies that claimed a tax holiday in 2004 dramatically reduced their national and global workforces.

In fact, 58 of the large corporations that took advantage of the 2004 tax holiday shed almost 600,000 workers in subsequent years. This downsizing was not a result of the economic meltdown as many of these companies prospered. Today, these 58 companies maintain combined cash reserves of more than $450 billion. There's nothing holding them back from investing in America.

These 58 giant corporations accounted for nearly 70 percent of the total repatriated funds and collectively saved an estimated $64 billion from what they otherwise would have owed in taxes. The 10 biggest "layoff leaders" were Citigroup, Hewlett-Packard, Bank of America, Pfizer, Merck, Verizon, Ford, Caterpillar, Dow Chemical, and DuPont.

The corporate flaks will complain that these job loss numbers are exaggerated. We believe they are low, but we won't know for sure until companies that benefit from U.S. tax breaks and subsidies are required to report, in plain language, the number of U.S. employees they have.

Congress shouldn't be fooled again. Limited incentives should go to activities that will create jobs, not another tax holiday for off shore tax dodgers. These companies are not in the business of creating jobs. They are in the business of shifting as much wealth to their top managers and shareholders as possible.

There are other businesses out there — small businesses and domestic companies rooted in local communities that should be the objects of our encouragement and support.

Management guru Jim Collins (no relation) has written about the characteristics of "built to last" companies, businesses that are not "take the money and run" oriented, but are dynamic, growing, and capable of adapting to changing market environments. Built-to-last companies don't play fast and loose with their stakeholders — namely, their employees, shareholders, the communities where they operate, and Mother Earth.

Unfortunately, a segment of corporate America embraces a "built to loot" business model. They shift every possible expense off their balance sheet and squeeze their stakeholders, with the exception of top management and shareholders. They outsource and offshore jobs and engage in accounting gymnastics to game their tax bills to nothing. They mooch from the common treasury, but don't contribute.

Lawmakers should block this fiscally irresponsible and entirely undeserved tax break.

Chuck Collins is a co-author of the new Institute for Policy Studies report, America Loses: Corporations that Take Tax Holidays Slash Jobs. www.ips-dc.org

Can Anyone Tackle Our Tax-Dodging CEOs?

September 6, 2011 ·

Sarah Anderson, a veteran analyst at the Institute for Policy Studies in Washington, D.C., has been the lead author of the Institute’s annual executive pay report ever since 1993.

On CEO pay, Anderson sighs, “I sometimes think I’ve seen everything.”

And then came the research for this year’s report — released last Wednesday — and the results floored even Anderson.

Last year, the Institute for Policy Studies researchers discovered, CEOs at 25 of America’s largest corporations — powerhouses that range from Boeing and Verizon to Prudential and G.E. — took home more in personal compensation than the companies they run paid Uncle Sam in federal corporate income tax.

In 2010, these 25 companies averaged a whopping $1.9 billion each in global profits. Yet they actually came out ahead last year at tax time. Uncle Sam owed them money, an average $304 million in tax refunds and credits.

The CEOs who call the shots at these 25 companies make up a quarter of 2010′s 100 highest-paid CEOs. Their average take-home last year: $16.7 million.

How could the companies these 25 CEOs rule be so profitable  — and so generous to their top execs — yet end up paying Uncle Sam so precious little?

Giant corporations like these, explains IPS study co-author Chuck Collins, are essentially “rewarding CEOs for aggressive tax avoidance.”

That reality has caught the eye of Rep. Elijah Cummings, the top Democrat on the House Oversight and Government Reform Committee. Last week, at the release of the new IPS study, Cummings called for hearings to examine “why CEO pay and corporate profits are skyrocketing while worker pay stagnates.”

The new IPS report, Executive Excess 2011: The Massive CEO Rewards for Tax Dodging, puts numbers on this soaring and stagnation. Last year, the study documents, CEOs at America’s S&P top 500 corporations saw their average pay jump 27.8 percent. Average worker pay rose just 3.3 percent.

The aggressive tax dodging that’s enriching corporations and CEOs, the IPS analysts add, doesn’t actually break any laws. Corporate America has seen to that — by just as aggressively gaming the political system to stud the tax code with loophole after loophole.

Of the 25 top firms that paid their CEOs more than Uncle Sam last year, Executive Excess points out, 18 sport tax haven subsidiaries.

In fact, 20 of the 25 major corporations that paid their CEO more than Uncle Sam last year, notes Executive Excess 2011, “also spent more on lobbying lawmakers than they paid in corporate taxes.” And 18 of the 25 “gave more to the political campaigns of their favorite candidates than they paid to the IRS in taxes.”

This corporate lobbying and campaign cash has, over the years, created a tax code that offers CEOs a wide array of tax-dodging options. Many involve tax havens. Of the 25 top firms that paid their CEOs more than Uncle Sam last year, Executive Excess points out, 18 sport tax haven subsidiaries.

The over 550 tax haven subsidiaries of these 18 firms make shifting profits offshore — and beyond the reach of federal tax collectors — almost effortless. One example of this effortlessness: the shell game known as “transfer pricing.”

To play this “transfer” game, a corporate chief typically hands a tax haven subsidiary control over the U.S.-based firm’s “intellectual property,” assets that might range from patents to logos. The shell company then charges the U.S.-based operation inflated royalties for the right to use this property.

The U.S.-based concern happily tallies these inflated royalty costs, adds them in with the company’s other regular expenses, and proceeds to tell the IRS that the company’s U.S. operations have lost money for the year. The resulting profits from all this scheming pile up, in turn, on the books of the tax haven subsidiary, where they face rock-bottom tax rates — or no taxes at all.

The tax code lets corporations ‘defer’ taxes, a power the code does not grant to individual taxpayers.

Last week’s IPS study drew extensive media coverage, from national dailies like the New York Times and Washington Post to top global news services. Reporters at many of these outlets asked the corporate giants the IPS study spotlights to defend themselves.

Some firms, like Bank of New York Mellon, offered no defense. Others, like Ameriprise and General Electric, argued they weren’t dodging taxes. They were merely “deferring” them.

The tax code does indeed let corporations “defer” taxes, a power the code does not grant to individual taxpayers. These deferrals, notes Executive Excess 2011 co-author Scott Klinger, amount to interest-free loans to corporations.

Even better — for corporations — the deferred taxes may go unpaid for decades. Taxes on earnings held offshore, for instance, do not come due until those earnings slide back into the United States. Adds Klinger: “If these funds are never brought home, the taxes are never paid.”

Verizon and eBay led the corporate pushback last week against the new IPS study. eBay charged that IPS had “misrepresented” the company’s tax situation. A Bloomberg reporter, in response, asked eBay and Verizon to disclose their exact 2010 federal tax return information. Both declined to make that disclosure.

Other reporters covering the corporate pushback told IPS that the corporate media relations officers that had contacted them couldn’t themselves explain what the numbers in the tax footnotes of their own corporate reports meant.

Corporations, IPS noted Friday in a reaction to the pushback, seem to complain “almost every time a story is written about a particular corporation’s tax position.” Yet these same corporations resist reforms that would require all companies to disclose clearer data on “what they actually pay in taxes.”

This year’s Institute for Policy Studies Executive Excess report offers outraged readers a guide to all the significant reform proposals — inside and outside Congress — on the tax and pay games CEOs play.

IPS has also created an action page online to help Americans push corporate tax and pay reform forward. And that reform, after this year’s Executive Excess, has seldom seemed more desperately needed.

“We have,” as the new 2011 Executive Excess sums up, “a corporate tax system today that works for top executives — and no one else.”

Sam Pizzigati edits Too Much, the online weekly on excess and inequality published by the Washington, D.C.-based Institute for Policy Studies. Read the current issue or sign up at Inequality.Org to receive Too Much in your email inbox.

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