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Corporate tax dodgers could fund schools, roads, clinics
By Frank Clemente |
July 1, 2013, Monday
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IN an ingenious effort to avoid billions of dollars in taxes, Apple Inc, has been levitating subsidiaries between American and Irish soil, claiming that from a tax-law perspective, they exist in neither country and so are subject to neither country's taxing authority.
And, sadly, the scheme has worked: no taxes have been paid to the US, a relatively paltry sum was paid to Ireland.
Though this was Apple's most audacious tax-dodging scheme, it wasn't the only one.
US Congressional investigators recently found that Apple had avoided paying virtually any taxes on US$74 billion in offshore profits over the past four years. That's a big loss of revenue needed to hire teachers, build roads or pay down debt.
How does Apple manage to skip out on its tax responsibilities on such a massive scale?
It shuffles profits generated by American ideas, American workers and American consumers through shell companies in tax havens such as Ireland, where it's subject to few or no levies.
And it's not alone among corporate giants. According to the Congressional joint tax committee, ending this kind of tax avoidance by big corporations would raise almost US$600 billion over the next decade. But Apple deserves special attention. Admired for its technological prowess and often in contention for the nation's most valuable company, it's a leader as well in stashing profits - over US$100 billion today - overseas and out of reach of US taxes.
Some might be tempted to praise such aggressive tax strategies. Except that needy kids are being kicked off Head Start, grandmothers are getting fewer Meals on Wheels, and disabled students are being denied special education - all because of ham-handed across-the-board federal budget cuts known as the "sequester." By cleaning up the whole overseas corporate tax mess we could restore 60 percent of the US$1 trillion in sequester cuts scheduled for the next decade.
But Apple and its corporate brethren - backed by their allies in Congress - want to do the opposite. Rather than close corporate tax loopholes, they want to reward corporations with money stashed overseas (Bloomberg estimates a staggering US$1.9 trillion) with a temporary tax amnesty, called a "repatriation holiday." That one-time pass would then be followed by a permanent tax amnesty, known as a "territorial tax system."
Corporate executives argue that drastically lowering the US taxes charged on "repatriated" cash would encourage companies to make investments and create jobs here. The trouble is we've tested that theory already and it failed miserably.
A recent study by the Economic Policy Institute found that there was no correlation between lower corporate tax rates and economic growth - if anything, the economy did better when corporate rates were higher.
There's real corporate tax reform legislation in Congress right now that would end offshore tax loopholes and raise US$600 billion over 10 years - money to restore battered public services, rev up our economy and pay down debt.
The author is executive director of Americans for Tax Fairness. Copyright: American Forum.
And, sadly, the scheme has worked: no taxes have been paid to the US, a relatively paltry sum was paid to Ireland.
Though this was Apple's most audacious tax-dodging scheme, it wasn't the only one.
US Congressional investigators recently found that Apple had avoided paying virtually any taxes on US$74 billion in offshore profits over the past four years. That's a big loss of revenue needed to hire teachers, build roads or pay down debt.
How does Apple manage to skip out on its tax responsibilities on such a massive scale?
It shuffles profits generated by American ideas, American workers and American consumers through shell companies in tax havens such as Ireland, where it's subject to few or no levies.
And it's not alone among corporate giants. According to the Congressional joint tax committee, ending this kind of tax avoidance by big corporations would raise almost US$600 billion over the next decade. But Apple deserves special attention. Admired for its technological prowess and often in contention for the nation's most valuable company, it's a leader as well in stashing profits - over US$100 billion today - overseas and out of reach of US taxes.
Some might be tempted to praise such aggressive tax strategies. Except that needy kids are being kicked off Head Start, grandmothers are getting fewer Meals on Wheels, and disabled students are being denied special education - all because of ham-handed across-the-board federal budget cuts known as the "sequester." By cleaning up the whole overseas corporate tax mess we could restore 60 percent of the US$1 trillion in sequester cuts scheduled for the next decade.
But Apple and its corporate brethren - backed by their allies in Congress - want to do the opposite. Rather than close corporate tax loopholes, they want to reward corporations with money stashed overseas (Bloomberg estimates a staggering US$1.9 trillion) with a temporary tax amnesty, called a "repatriation holiday." That one-time pass would then be followed by a permanent tax amnesty, known as a "territorial tax system."
Corporate executives argue that drastically lowering the US taxes charged on "repatriated" cash would encourage companies to make investments and create jobs here. The trouble is we've tested that theory already and it failed miserably.
A recent study by the Economic Policy Institute found that there was no correlation between lower corporate tax rates and economic growth - if anything, the economy did better when corporate rates were higher.
There's real corporate tax reform legislation in Congress right now that would end offshore tax loopholes and raise US$600 billion over 10 years - money to restore battered public services, rev up our economy and pay down debt.
The author is executive director of Americans for Tax Fairness. Copyright: American Forum.
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