US Pirg: Tax Shell Game: The Taxpayer Cost of Offshore Corporate Havens

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Tax Shell Game: The Taxpayer Cost of Offshore Corporate Havens

Many of the largest corporations in our country hide profits made in the United States in offshore shell companies and sham headquarters in order to avoid paying billions in federal taxes. The result is massive losses in revenue for the U.S. Treasury – which ultimately must be made up by taxpayers. The cost to taxpayers due to the use of offshore tax havens is as high as $100 billion per year - $1 trillion over 10 years. U.S.-based individuals and corporations who pay taxes on their revenues must shoulder this burden for those who do not. • Taxpayers must shoulder the burden – U.S. PIRG Education Fund calculated each state’s taxpayer contribution proportional to their yearly federal contribution to make up for the $100 billion lost. • US allies in other nations are also calling for decisive action to reign in these abusive tax havens. The Group of 20 (G-20), which provides a forum for world financial leaders to promote global economic stability, recently issued a communique providing for sanctions against tax haven countries.• In California 78 percent of corporations paid no more than the $800 minimum franchise tax in 2001. Worse, over half of profitable corporations paid no more than $800 minimum, including 46 corporations with over $1 billion in 2001 receipts. • A study by the Multistate Tax Commission, a joint agency of state governments, estimates that by 2001 the growth of corporate tax sheltering accounted for $12.4 billion in lost annual revenue beyond what occurred during the 1980s. According to mid-range estimates, California corporate tax revenue was 19 percent lower than it should have been.• The federal Government Accountability Office estimates that underreported corporate income taxes and employment taxes cost the federal government $84 billion in 2001. The GAO also reports that 33 percent of large U.S. corporations reported no tax liability in 1995, a percentage that rose to 45 percent by 2000. • A study of 252 Fortune 500 companies between 2001 and 2003 found that they paid state taxes at only a third of the statutory rates and 71 of them paid no state taxes at all during at least one of these years.