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Offshore Tax Havens Cost Average Washington Taxpayer $1,091 a Year, Washington Small Business $3,616
With Tax Day approaching, it’s a good time to be reminded of where our tax dollars are going. WashPIRG released a new study which reveals that the average Washington taxpayer in 2012 would have to shoulder an extra $1,091 in taxes to make up for the revenue lost due to the use of offshore tax havens by corporations and wealthy individuals.
“Tax dodging is not a victimless offense. When companies use accounting gimmicks to move their profits to tax haven shell companies, the rest of us have to pick up the tab,” said Micaela Preskill advocate for WashPIRG. “With the nation facing such serious budget challenges, it’s a no-brainer that we need to close these loopholes and stop letting large corporations avoid paying what they should.”
Every year, corporations and wealthy individuals avoid paying an estimated $150 billion in taxes by using complicated accounting tricks to shift their profits to offshore tax havens. Of that $150 billion, $90 billion is avoided specifically by corporations.
The report additionally found that the average Washington small business would have to pay $3,616 to cover the cost of offshore tax dodging by large corporations. Offshore tax havens give large multinationals a competitive advantage over responsible small businesses which don’t use tax havens and get stuck footing the bill for corporate tax dodging.
“All of the small business owners I know are having trouble right now. And large corporations who are making a lot in profit every year are not paying their taxes. It doesn’t make sense!” said Barbara Elza, owner of Seattle’s Daily Dozen Doughnut.
"Small, locally owned businesses like the ones we work with are forced to pay thousands of extra dollars in order to make up for multibillion dollar corporations that are utilizing offshore tax havens," said Gerald Hankerson an organizer with the Main Street Alliance of Washington. "This creates an uneven playing field in which small businesses are forced to compete with massive corporations that are able to rig the system to their advantage. It's time for large corporations to play by the same rules as the rest of us and pay their fair share."
Many of America’s largest and best-known corporations use these complex tax avoidance schemes to shift their profits offshore and drastically shrink their tax bill:
• Pfizer, the world’s largest drug maker, made 40 percent of its sales in the U.S. over the past five years, but thanks to their use of offshore tax loopholes they reported no taxable income in the U.S. during that time. The company operates 172 subsidiaries in tax havens and has $73 billion parked offshore which remains untaxed by the U.S., according to its own SEC filing. That is the second highest amount of money sitting offshore for one U.S. multinational corporation.
• Microsoft avoided $4.5 billion in federal income taxes over a three year period by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. Microsoft maintains five tax haven subsidiaries and keeps 70 percent of its cash offshore, a total of $60.8 billion, on which it would otherwise owe $19.4 billion in U.S. taxes.
• Citigroup – a bank that was bailed out by taxpayers during the financial meltdown of 2008 – maintains 20 subsidiaries in tax havens and has $42.6 billion sitting offshore, on which it would otherwise owe $$11.5 billion in taxes, according to its own SEC filing. Citigroup currently ranks eighth among U.S. multinationals for having the most money stashed offshore.
“It is appalling that these companies get out of paying for the nation’s infrastructure, education system, and security that help make them successful,” added Preskill.
The report recommends closing a number of offshore tax loopholes. Many of these reforms are included in the Cut Unjustified Tax Loopholes Act (Senate Bill 268).
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WashPIRG, the Washington Public Interest Research Group, is a non-profit, non-partisan public interest advocacy organization that takes on powerful interests on behalf of its members, working to win concrete results for our health and well-being.
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