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US companies keep $2.1 trillion profits in overseas tax havens (and Ireland has its fair share)

The companies, many of which have subsidiaries in Ireland, would collectively owe the United States an estimated $620 billion if they were to repatriate their profits to there.

The study finds that offshore tax havens like the Bahamas and the Cayman Islands hold vast amounts of companies' profits
The study finds that offshore tax havens like the Bahamas and the Cayman Islands hold vast amounts of companies' profits
Image: AP/Press Association Images

THE TOP-EARNING 500 American companies reported booking $2.1 trillion profits in overseas tax havens in 2014 in order to avoid paying tax in the United States, according to a new study published this week.

The companies, many of which have subsidiaries in Ireland, would collectively owe the United States an estimated $620 billion if they were to repatriate their profits to there.

The study, Offshore Shell Games, was released by Citizens for Tax Justice and the US Public Interest Research Group Education Fund and focused on Fortune 500 companies.

The Fortune 500 is an annual list that ranks the top 500 largest US companies by total revenue paid in a year.

It found that over 70% of Fortune 500 companies had used tax havens in 2014, and that just 30 companies accounted for 62% ($1.4 trillion) of all the offshore profits.

Apple, which has its European headquarters in Cork, had by far the biggest total on the list, with $181.1bn in offshore profits declared in 2014.

The study also references a 2013 American Senate investigation which found that Apple avoided paying any tax on a lot of their offshore profits by structuring two Irish subsidiary companies to be tax residents of neither the US, where they are managed and controlled, nor Ireland, where they are incorporated.

20151015_Offshore_JOU (1) The top 10 American companies that reported offshore profits in foreign tax havens in 2014 Source: Statista

Of the 10 companies with the most in offshore profits, four have their European headquarters in Ireland. These are Apple ($181.1bn), Microsoft (108.3bn), Pfizer ($74bn) and Google ($45bn).

The study also found that between 2008 and 2014 the amount of offshore cash holdings for American companies doubled, while in some cases to amount of subsidiaries each company reported went down.

Google, for example, reported operating 25 subsidiaries in tax havens in 2009, but since 2009 only discloses two, both of which are in Ireland. However, the study says that as of 2012 the other 23 subsidiaries are still in operation and the amount of cash Google reported having offshore increased in that time from $7.7bn to $47.4bn.

“Corporations that disclose fewer tax haven subsidiaries do not necessarily dodge taxes less,” the study says.

Many companies have disclosed fewer tax haven subsidiaries in recent years, all while increasing the amount of case they keep offshore.

Offshore

Nearly 30% of Fortune 500 companies (around 140) had subsidiaries in Ireland in 2014. In total, approximately $87bn of profits were reported in Ireland, which is 42% of our GDP.

In Bermuda and the Cayman Islands – two notorious tax havens – the amount of profit reported was 1,643% and 1,600% of each country’s GDP respectively.

The report of the study concludes that US Congress should change the laws around tax in order to bring some of the vast amounts of cash back to the American exchequer.

“Policymakers should reform the corporate tax code to end the incentives that encourage companies to use tax havens, close the most egregious loopholes, and increase transparency so companies can’t use layers of shell companies to shrink their taxes,” it says.

Other key points in the study:

  •  At least 358 Fortune 500 companies operate subsidiaries in in tax haven jurisdictions as of 2014. IN all, they maintain 7,622 tax haven subsidiaries.
  • 60% of companies with tax haven subsidiaries have at least one in Bermuda or the Cayman Islands.
  • Ireland has the 6th most subsidiaries of Fortune 500 companies, with the Netherlands having the most.
  • Only 57 companies disclosed what they would expect to pay if they didn’t report profits offshore for tax purposes 

Infograph provided by Statista

Read: Does raising tax on cigarettes actually work?

DailyEdge.ie: 14 new taxes that would solve Ireland’s problems

More: Here’s how families will be affected by the Budget

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Cormac Fitzgerald

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