The Use Of Offshore Tax Havens By Fortune 500 Companies
Offshore Shell Games2015The Use of Offshore Tax Havensby Fortune 500 CompaniesEducation Fund
Offshore Shell Games2015The Use of Offshore Tax Havensby Fortune 500 CompaniesRobert S. McIntyre, Citizens for Tax JusticeRichard Phillips, Citizens for Tax JusticePhineas Baxandall, U.S. PIRG Education FundEducation FundOctober 2015
AcknowledgmentsThe authors thank Amber Erickson, Grace Smith, Brian Harvey, and Kayla Kitson for their hard workin collecting the data behind this report. The authors also thank Jaimie Woo, formerly of U.S. PIRGand Matt Gardner of the Institute on Taxation and Economic Policy for their thoughtful commentsand editorial support. The authors bear responsibility for any factual errors. The recommendations arethose of MASSPIRG Education Fund and Citizens for Tax Justice.MASSPIRG Education Fund and Citizens for Tax Justice are grateful to the FACT Coalition andthe Open Society Foundations for making this report possible.The views expressed in this report are those of the authors and do not necessarily reflect the viewsof our funders.2015 Citizens for Tax Justice and MASSPIRG Education Fund. Some Rights Reserved. This workis licensed under a Creative Commons Attribution Non-Commercial No Derivatives 3.0 UnportedLicense. To view the terms of this license, visit creativecommons.org/licenses/by-nc-nd/3.0. Formore information about MASSPIRG Education Fund, please visit www.masspirgedfund.org.MASSPIRG Education FundWith public debate around important issues often dominated by special interests pursuing theirown narrow agendas, MASSPIRG Education Fund offers an independent voice that works on behalf of the public interest. MASSPIRG Education Fund, a 501(c)(3) organization, works to protectconsumers and promote good government. We investigate problems, craft solutions, educate thepublic, and offer Bay Staters meaningful opportunities for civic participation. For more information, please visit our website at www.masspirgedfund.org.Citizens for Tax Justice (CTJ)Citizens for Tax Justice, founded in 1979, is a public interest research and advocacy organizationfocusing on federal, state and local tax policies and their impact upon our nation. CTJ’s missionis to give ordinary people a greater voice in the development of tax laws. Against the armies ofspecial interest lobbyists for corporations and the wealthy, CTJ fights for fair taxes for middle- andlow-income families, requiring the wealthy to pay their fair share, closing corporate tax loopholes,and adequately funding important government services. For more information about CTJ, pleasevisit www.ctj.org.Cover illustration: rolffimages/BigstockDesign and layout: Alec Meltzer, meltzerdesign.net
Table of ContentsExecutive Summary . 1Introduction . 4Most of America’s Largest CorporationsMaintain Subsidiaries in Offshore Tax Havens . 7Cash Booked Offshore for Tax Purposes byU.S. Multinationals Doubled between 2008 and 2014 . 10Evidence Indicates Much of Offshore Profits are Booked to Tax Havens . 12Firms Reporting Fewer Tax Haven SubsidiariesDo Not Necessarily Dodge Fewer Taxes Offshore . 16Measures to Stop Abuse of Offshore Tax Havens . 18Methodology. 20Appendix: Offshore Profits and Tax HavenSubsidiaries of Fortune 500 Companies . 21Endnotes. 49
Executive SummaryU.S.-based multinational corporations areallowed to play by a different set of rulesthan small and domestic businesses or individuals when it comes to the tax code. Ratherthan paying their fair share, many multinational corporations use accounting tricks topretend for tax purposes that a substantialportion of their profits are generated in offshore tax havens, countries with minimal orno taxes where a company’s presence may beas little as a mailbox. Multinational corporations’ use of tax havens allows them to avoidan estimated 90 billion in federal incometaxes each year.Congress, by failing to take action to end tothis tax avoidance, forces ordinary Americansto make up the difference. Every dollar in taxesthat corporations avoid by using tax havensmust be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.This study examines the use of tax havens byFortune 500 companies in 2014. It reveals thattax haven use is ubiquitous among America’slargest companies and that a narrow set ofcompanies benefits disproportionately.Most of America’s largest corporationsmaintain subsidiaries in offshore tax havens. At least 358 companies, nearly 72percent of the Fortune 500, operate subsidiaries in tax haven jurisdictions as of theend of 2014.UÑ All told, these 358 companies maintain atleast 7,622 tax haven subsidiaries.UÑ The 30 companies with the most moneyofficially booked offshore for tax purposescollectively operate 1,225 tax haven subsidiaries.Approximately 60 percent of companieswith tax haven subsidiaries have set up atleast one in Bermuda or the Cayman Islands— two particularly notorious tax havens.Furthermore, the profits that all Americanmultinationals — not just Fortune 500 companies — collectively claimed they earned inthese two island nations in 2010 totaled 1,643percent and 1,600 percent of each country’sentire yearly economic output, respectively.Fortune 500 companies are holding more than 2.1 trillion in accumulated profits offshore fortax purposes. Just 30 Fortune 500 companiesaccount for 65 percent of these offshore profits. These 30 companies with the most moneyoffshore have booked 1.4 trillion overseas fortax purposes.Only 57 Fortune 500 companies disclose whatthey would expect to pay in U.S. taxes if theseprofits were not officially booked offshore. Intotal, these 57 companies would owe 184.4billion in additional federal taxes. Based onthese 57 corporations’ public disclosures, theaverage tax rate that they have collectively paidto foreign countries on these profits is a mereExecutive Summary1
6.0 percent, indicating that a large portion ofthis offshore money has been booked in tax havens. If we apply that average tax rate of 6.0percent to the entirety of Fortune 500 companies, they would collectively owe 620billion in additional federal taxes. Some ofthe worst offenders include:on those offshore profits, indicating thatnearly all of the money is officially held bysubsidiaries in tax havens. Nike likely doesthis in part by licensing the trademarks forsome of its products to three subsidiariesin Bermuda to which it then pays royalties(essentially to itself).UÊ Apple: Apple has booked 181.1 billionoffshore — more than any other company.It would owe 59.2 billion in U.S. taxes ifthese profits were not officially held offshore for tax purposes. A 2013 Senate investigation found that Apple has structuredtwo Irish subsidiaries to be tax residentsof neither the United States, where theyare managed and controlled, nor Ireland,where they are incorporated. This arrangement ensures that they pay no tax toany government on the lion’s share of theiroffshore profits.Some companies that report a significantamount of money offshore maintain hundredsof subsidiaries in tax havens, including the following:UÊ American Express: The credit card company officially reports 9.7 billion offshorefor tax purposes on which it would owe 3 billion in U.S. taxes. That implies thatAmerican Express currently has paid only a4 percent tax rate on its offshore profits toforeign governments, indicating that mostof the money is booked in tax havens levying little to no tax. American Express maintains 23 subsidiaries in offshore tax havens.UÊ Nike: The sneaker giant officially holds 8.3 billion offshore for tax purposes onwhich it would owe 2.7 billion in U.S.taxes. This implies Nike pays a mere 2.5percent tax rate to foreign governments2Offshore Shell Games 2015UÊ PepsiCo maintains 132 subsidiaries in offshore tax havens. The soft drink maker reports holding 37.8 billion offshore for taxpurposes, though it does not disclose whatits estimated tax bill would be if it didn’tbook those profits offshore.UÊ Pfizer, the world’s largest drug maker, operates 151 subsidiaries in tax havens andofficially holds 74 billion in profits offshore for tax purposes, the fourth highestamong the Fortune 500. Pfizer recentlyattempted the acquisition of a smaller foreign competitor so it could reincorporateon paper as a “foreign company.” Pullingthis off would have allowed the company atax-free way to use its supposedly offshoreprofits in the U.S.UÊ Morgan Stanley reports having 210 subsidiaries in offshore tax havens. The bankofficially holds 7.4 billion offshore. Ithas also been infamously implicated in facilitating individual tax evasion through itsSwiss banking division.
Corporations that disclose fewer tax havensubsidiaries do not necessarily dodge taxesless. Many companies have disclosed fewertax haven subsidiaries in recent years, allwhile increasing the amount of cash theykeep offshore. Some companies may simplybe failing to disclose substantial numbers oftax haven subsidiaries. Others may be bookinglarger amounts of income to fewer tax havensubsidiaries.Consider:UÊ Citigroup reported operating 427 tax haven subsidiaries in 2008 but disclosed only41 in 2014. Over that time period, Citigroup nearly doubled the amount of cashit reported holding offshore. The companycurrently pays only an 8.5 percent tax rateoffshore, implying that most of those profits have been booked to low- or no-tax jurisdictions.UÊ Walmart reported operating zero tax haven subsidiaries in 2014 and for the past decade. Despite this, a recent report releasedby Americans for Tax Fairness revealedthat the company operates as many as 75tax haven subsidiaries (using this report’slist of tax haven countries) that were notincluded in its SEC filings. Over the pastdecade, Walmart’s offshore income hasgrown from 6.8 billion in 2005 to 23.3billion in 2014.UÊ Bank of America reported operating 264tax haven subsidiaries in 2013 but disclosedonly 22 in 2014. At the same time, Bank ofAmerica’s offshore holdings have increasedmodestly from 17 billion to 17.2 billion.UÊ Google reported operating 25 subsidiaries in tax havens in 2009, but since 2010only discloses two, both in Ireland. During that period, it increased the amountof cash it reported offshore from 7.7 billion to 47.4 billion. An academic analysisfound that as of 2012, the 23 no-longerdisclosed tax haven subsidiaries were stilloperating.UÊ Microsoft, which reported operating 10subsidiaries in tax havens in 2007, disclosedonly five in 2014. During this same timeperiod, the amount of money that Microsoft reported holding offshore jumped by afactor of 14. Microsoft has paid a tax rate ofonly 3 percent to foreign governments onthose profits, suggesting that most of thecash is booked in tax havens.Congress can and should take strong action to prevent corporations from usingoffshore tax havens, which in turn wouldrestore basic fairness to the tax system, reduce the deficit and improve the functioning of markets.There are clear policy solutions that lawmakers can enact to crack down on tax havenabuse. They should end the incentives forcompanies to shift profits offshore, close themost egregious offshore loopholes and increase transparency.Executive Summary3
IntroductionThere is no greater symbol of the excesses ofthe world of corporate tax havens than the Ugland house, a modest five-story office buildingin the Cayman Islands that serves as the registered address for 18,857 companies.1 Simplyby registering subsidiaries in the Cayman Islands, U.S. companies can use legal accountinggimmicks to make much of their U.S.-earnedprofits appear to be earned in the Caymans andthus pay no taxes on those profits.Photos (left to right): Paulo Fierro, Rob StinnettU.S. law does not even require that subsidiaries have any physical presence in the Caymansbeyond a post office box. In fact, about halfof the subsidiaries registered at the infamousUgland have their billing address in the U.S.,even while they are officially registered in theCaymans.2 This unabashedly false corporate“presence” is one of the hallmarks of a tax haven subsidiary.4Offshore Shell Games 2015Companies can avoid paying taxes by bookingprofits to a tax haven because U.S. tax laws allow them to defer paying U.S. taxes on profitsthat they report are earned abroad until they”repatriate” the money to the United States.Many U.S. companies game this system by using loopholes that allow them to disguise profits actually made in the U.S. as “foreign” profits earned by subsidiaries in a tax haven.Offshore accounting gimmicks by multinational corporations have created a disconnectbetween where companies locate their actualworkforce and investments, on one hand, andwhere they claim to have earned profits, on theother. The Congressional Research Servicefound that in 2008, American multinationalcompanies collectively reported 43 percent oftheir foreign earnings in five small tax havencountries: Bermuda, Ireland, Luxembourg,
What is a Tax Haven?Tax havens have four identifying features.3First, a tax haven is a jurisdiction with verylow or nonexistent taxes. Second is theexistence of laws that encourage financialsecrecy and inhibit an effective exchangeof information about taxpayers to tax andlaw enforcement authorities. Third is ageneral lack of transparency in legislative,legal or administrative practices. Fourth isthe lack of a requirement that activities be“substantial,” suggesting that a jurisdictionis trying to earn modest fees by enablingtax avoidance.This study uses a list of 50 tax haven jurisdictions, which each appear on at least onelist of tax havens compiled by the Organisation for Economic Cooperation and Development (OECD), the National Bureauof Economic Research, or as part of a U.S.District Court order listing tax havens.These lists were also used in a 2008 GAOreport investigating tax haven subsidiaries.4the Netherlands, and Switzerland. Yet thesecountries accounted for only 4 percent of thecompanies’ foreign workforces and just 7 percent of their foreign investments. By contrast,American multinationals reported earning just14 percent of their profits in major U.S. trading partners with higher taxes — Australia,Canada, the UK, Germany, and Mexico —which accounted for 40 percent of their for-eign workforce and 34 percent of their foreigninvestment.5 The IRS released data last yearshowing that American multinationals collectively reported in 2010 that 54 percent of theirforeign earnings were “earned” in 12 notorioustax havens (see table 4).6Profits booked “offshore” often remain onshore, invested in U.S. assets.Much if not most of the profits kept “offshore”are actually housed in U.S. banks or investedin American assets, but are registered in thename of foreign subsidiaries. In such cases,American corporations benefit from the stability of the U.S. financial system while avoiding paying taxes on their profits that officiallyremain booked “offshore” for tax purposes.7 ASenate investigation of 27 large multinationals with substantial amounts of cash that wassupposedly “trapped” offshore found insteadthat more than half of the offshore funds werealready invested in U.S. banks, bonds, andother assets.8 For some companies the percentage is much higher. A Wall Street Journal investigation found that 93 percent of themoney Microsoft has officially booked “offshore” is invested in U.S. assets.9 In theory,companies are barred from investing directlyin their U.S. operations, paying dividendsto shareholders or repurchasing stock withmoney they declare to be “offshore.” But eventhat restriction is easily evaded because companies can use the cash supposedly “trapped”offshore for those purposes by borrowing atnegligible rates using their offshore holdingsas implied collateral.Introduction5
A Note On MisleadingTerminology“Offshore profits”: Using the term “offshoreprofits” without any qualification inaccurately describes how U.S. multinationalshold profits in tax havens. The term implies that these profits were earned purelythrough foreign business activity. In reality, much of these “offshore profits” areactually U.S. profits that companies havedisguised as foreign profits made in tax havens to avoid taxes. To be more accurate,this study instead describes these funds as“profits booked offshore for tax purposes.”“Repatriation” or “bringing the money back”:Repatriation is a legal term used to describewhen a U.S. company declares offshoreprofits as returned to the U.S. As a generaldescription, “repatriation” wrongly impliesthat profits companies have booked offshore for tax purposes are actually sittingoffshore and missing from the U.S. economy, and that a company cannot make use ofthose profits in the U.S. without “bringingthem back” and paying U.S. tax.6Offshore Shell Games 2015Average TaxpayersPick Up the Tab forOffshore Tax DodgingCongress has created loopholes in our tax codethat allow offshore tax avoidance, which forcesordinary Americans to make up the difference.The practice of shifting corporate income totax haven subsidiaries reduces federal revenueby an estimated 90 billion annually.10 Everydollar in taxes companies avoid by using taxhavens must be balanced by higher taxes paidby other Americans, cuts to government programs, or increased federal debt. If small business owners were to pick up the full tab foroffshore tax avoidance by multinationals, theywould on average each have had to pay an estimated 3,244 in additional taxes last year.11It makes sense for profits earned in Americato be subject to U.S. taxation. The profitsearned by these companies generally dependon access to America’s largest-in-the-worldconsumer market, a well-educated workforcetrained by our school systems, strong privateproperty rights enforced by our court system,and American roads and rail to bring productsto market.12 Multinational companies that depend on America’s economic and social infrastructure are shirking their obligation to payfor that infrastructure when they shelter theirprofits overseas.
Most of America’s Largest CorporationsMaintain Subsidiaries in Offshore Tax HavensThis study found that as of 2014, 358 of Fortune 500 companies — nearly three-quarters— disclose subsidiaries in offshore tax havens, indicating how pervasive tax haven useis among large companies. All told, these 358companies maintain at least 7,622 tax havensubsidiaries.13 The 30 companies with themost money held offshore collectively disclose1,225 tax haven subsidiaries. Bank of America,Citigroup, JPMorgan-Chase, Goldman Sachs,Wells Fargo and Morgan Stanley — all largefinancial institutions that received taxpayerbailouts in 2008 — disclose a combined 412subsidiaries in tax havens.Companies that rank high for both the numberof tax haven subsidiaries and how much profitthey book offshore for tax purposes include:UÊ PepsiCo maintains 132 subsidiaries in offshore tax havens. The soft drink maker reports holding 37.8 billion offshore for taxpurposes, though it does not disclose whatits estimated tax bill would be if it didn’tkeep those profits offshore.UÊ Pfizer, the world’s largest drug maker, operates 151 subsidiaries in tax havens andofficially 74 billion in profits offshore fortax purposes, the fourth highest among theFortune 500. The company made morethan 41 percent of its sales in the U.S. between 2008 and 2014,14 but managed toreport no federal taxable income for sevenyears in a row. This is because Pfizer usesaccounting techniques to shift the locationof its taxable profits offshore. For example,the company can transfer patents for itsdrugs to a subsidiary in a low- or no-taxcountry. Then when the U.S. branch ofPfizer sells the drug in the U.S., it “pays”its own offshore subsidiary high licensingfees that turn domestic profits into onthe-books losses and shifts profit overseas.Pfizer recently attempted a corporate “inversion” in which it would have acquired asmaller foreign competitor so it could reincorporate on paper in the United Kingdomand no longer be an American company.A key reason Pfizer attempted this maneuver was to make it even easier to shiftU.S. profits offshore and have full use oftheir offshore cash without paying taxes onthem.UÊ Morgan Stanley reports having 210 subsidiaries in offshore tax havens. The bankofficially holds 7.4 billion offshore. Ithas also been infamously implicated in facilitating individual tax evasion through itsSwiss banking division.Most of America’s Largest Corporations Maintain Subsidiaries in Offshore Tax Havens7
Table 1: Top 20 Companies with the Most Tax Haven SubsidiariesCompany8Number ofTax HavenSubsidiariesLocations of SubsidiariesKKR258Cayman Islands (217), Channel Islands (6), Cyprus (1), Hong Kong (3), Ireland (12),Luxembourg (6), Mauritius (5), Singapore (8)Morgan Stanley210Bermuda (4), Cayman Islands (100), Channel Islands (10), Cyprus (2), Gibraltar (3), Hong Kong(12), Ireland (6), Luxembourg (36), Malta (1), Mauritius (5), Netherlands (21), Singapore (8),Switzerland (2)AES206Bahamas (1), Barbados (1), Bermuda (6), British Virgin Islands (10), Cayman Islands (83),Channel Islands (1), Costa Rica (1), Cyprus (2), Hong Kong (1), Ireland (3), Jordan (2),Luxembourg (1), Mauritius (3), Netherlands (78), Panama (7), Singapore (6)BlackstoneGroup161Cayman Islands (128), Channel Islands (2), Hong Kong (5), Ireland (7), Luxembourg (1),Mauritius (4), Netherlands (12), Singapore (2)Thermo FisherScientific155Barbados (4), Bermuda (4), British Virgin Islands (1), Cayman Islands (12), Channel Islands(1), Costa Rica (1), Gibraltar (2), Hong Kong (12), Ireland (7), Luxembourg (24), Malta (6),Netherlands (53), Singapore (10), Switzerland (18)Pfizer151Cayman Islands (1), Channel Islands (8), Costa Rica (3), Hong Kong (8), Ireland (27),Luxembourg (38), Netherlands (52), Panama (4), Singapore (5), Switzerland (5)PepsiCo132Barbados (1), Bermuda (15), Cayman Islands (6), Costa Rica (2), Cyprus (13), Gibraltar (3),Hong Kong (9), Ireland (12), Jordan (1), Liechtenstein (1), Luxembourg (26), Mauritius (2),Netherlands (32), Panama (1), Singapore (2), Switzerland (6)Merck121Bermuda (10), Cayman Islands (1), Costa Rica (2), Cyprus (3), Hong Kong (3), Ireland (25),Lebanon (1), Luxembourg (1), Netherlands (42), Panama (5), Singapore (9), Switzerland (19)Marsh &McLennan117Aruba (1), Bahamas (1), Bahrain (1), Barbados (5), Bermuda (23), British Virgin Islands (1),Cayman Islands (2), Channel Islands (3), Cyprus (2), Hong Kong (10), Ireland (17), Isle ofMan (4), Jordan (1), Liechtenstein (1), Luxembourg (7), Macau (1), Malta (2), Mauritius (1),Netherlands (14), Panama (2), Singapore (9), Switzerland (9)Stanley Black &Decker110British Virgin Islands (4), Cayman Islands (8), Costa Rica (1), Hong Kong (16), Ireland (23),Liechtenstein (1), Luxembourg (17), Macau (1), Mauritius (1), Netherlands (20), Panama (4),Singapore (8), Switzerland (6)Wells Fargo98Aruba (1), Bahamas (2), Barbados (1), Bermuda (5), British Virgin Islands (3), Cayman Islands(36), Costa Rica (1), Hong Kong (6), Ireland (4), Luxembourg (23) Mauritius (7), Netherlands(6), Singapore (3)Dow Chemical92Bahrain (3), Bermuda (7), Costa Rica (2), Hong Kong (7), Ireland (2), Luxembourg (1),Mauritius (2), Netherlands (41), Panama (1), Singapore (15), Switzerland (10), U.S. VirginIslands (1)AbbottLaboratories91Bahamas (2), Barbados (1), Bermuda (6), British Virgin Islands (1), Cayman Islands (4), CostaRica (3), Cyprus (1), Gibraltar (3), Ireland (13), Lebanon (1), Luxembourg (7), Malta (2),Netherlands (23), Panama (13), Singapore (5), Switzerland (5), U.S. Virgin Islands (1)EmersonElectric86Bahrain(2), Bermuda (2), British Virgin Islands (1), Cayman Islands (4), Channel Islands (1),Costa Rica (1), Hong Kong (14), Ireland (4), Luxembourg (1), Mauritius (3), Netherlands (25),Panama (1), Singapore (14), Switzerland (13)Offshore Shell Games 2015
Table 1 (continued): Top 20 Companies with the Most Tax Haven SubsidiariesNumber ofTax HavenSubsidiariesCompanyLocations of SubsidiariesMondelézInternational82Bahamas (1), Bahrain (2), Costa Rica (2), Cyprus (1), Hong Kong (2), Ireland (15), Lebanon (2),Luxembourg (3), Mauritius (1), Netherlands (27), Panama (1), Singapore (10), Switzerland (15)Illinois ToolWorks81Bermuda (11), British Virgin Islands (4), Costa Rica (2), Hong Kong (9), Ireland (5),Luxembourg (10), Malta (1), Mauritius (2), Netherlands (23), Singapore (11), Switzerland (3)Ecolab80Antigua and Barbuda (1), Aruba (1), Bahamas (1), Barbados (1) Bermuda (1), Cayman Islands(2), Channel Islands (1), Costa Rica (1), Hong Kong (5), Ireland (4), Luxembourg (11), Malta(3), Mauritius (1), Netherlands (33), Panama (1), Singapore (4), St. Lucia (1), Switzerland (6),U.S. Virgin Islands (2)OccidentalPetroleum80Bermuda (59), Cayman Islands (9), Hong Kong (1), Liberia (1), Malta (1), Netherlands (4),Panama (1), Singapore (2), Switzerland (2)MarriottInternational79Anguilla (1), Aruba (1), Bahamas (1), Bahrain (1), Barbados (1) Bermuda (6), British VirginIslands (7), Cayman Islands (10), Channel Islands (1), Costa Rica (1), Ireland (4), Jordan (2),Lebanon (1), Luxembourg (6), Malta (1), Netherlands (17), Panama (1), Singapore (4), St. Kittsand Nevis (2), St. Lucia (1), Switzerland (6), Turks and Caicos (1), U.S. Virgin Islands (3)NationalOilwell Varco76Aruba (1), Bahrain (1), Barbados (2), Bermuda (1), British Virgin Islands (2), Cayman Islands(7), Channel Islands (1), Cyprus (1), Mauritius (2), Netherlands (38), Netherlands Antilles (1),Singapore (18), Switzerland (1)TOTAL2,466Figure 1: Percent of Fortune 500 Companies with 2014 Subsidiaries in 20 Top Tax Havens50%45%40%35%30%25%20%15%10%5%Koxe ngmboSw urgitzerlandIreCalayman ndIslandBe srmudBraMitiaushritiViusrginIslanCo dsstaRicaPanamBa arbChadanosnel LungHogaSinNetherlands0%Most of America’s Largest Corporations Maintain Subsidiaries in Offshore Tax Havens9
Cash Booked Offshore for Tax Purposesby U.S. Multinationals Doubledbetween 2008 and 2014In recent years, U.S. multinational companieshave sharply increased the amount of moneythat they book to foreign subsidiaries. An April2015 study by research firm Audit Analyticsfound that the Russell 1000 list of U.S. companies collectively reported having nearly 2.3trillion held offshore. That is more than double the income reported offshore in 2008.15For many companies, increasing profits heldoffshore does not mean building factoriesabroad, selling more products to foreign customers, or doing any additional real businessactivity in other countries. Instead, many companies use accounting tricks to disguise theirprofits as “foreign,” and book them to a subsidiary in a tax haven to avoid taxes.The practice of artificially shifting profits to taxhavens has increased in recent years. In 1999,the profits American multinationals reportedearning in Bermuda represented 260 percentof that country’s entire economy. In 2008, itwas up to 1,000 percent.16 More offshore profit shifting means more U.S. taxes avoided byAmerican multinationals. A 2007 study by taxexpert Kimberly Clausing of Reed College estimated that the revenue lost to the Treasurydue to offshore tax haven abuse by corporations totaled 60 billion annually. In 2011, sheupdated her estimate to 90 billion.1710Offshore Shell Games 2015The 286 Fortune 500 Companies that report offshore profits collectively hold 2.1trillion offshore, with 30 companies accounting for 65 percent of the total.By the end of 2014, the 286 Fortune 500 companies that report holding offshore cash hadcollectively accumulated over 2.1 trillion thatthey declare to be “permanently reinvested”abroad. (This designation allows them to avoidcounting the taxes they have “deferred” as afuture cost in their financial reports to shareholders.) While 57 percent of Fortune 500companies report having income offshore,some companies shift profits offshore far moreaggressively than others. The 30 companieswith the most money offshore account for 1.4trillion of the total. In other words, just 30Fortune 500 companies account for 65 percentof the offshore cash.Not all companies report how much cash theyhave “permanently reinvested offshore,” so thefinding that 286 companies report offshoreprofits does not include all cash booked offshore. For example, Northrop Grumman reported in 2011 having 761 million offshore.But since 2012, the defense contractor has reported that it continues to have permanentlyreinvested earnings, but no longer specifieshow much.
Table 2: Top 30 Companies with the Most Money Held OffshoreCompanyAmount HeldOffshore(Millions )Number ofTax HavenSubsidiariesAmount HeldOffshore(Millions )Number ofTax .P. Morgan Chase& i Lilly25,70027CompanyApple181,1003General nternationalBusiness Machines61,40015Merck60,000121Johnson & Johnson53,40058Qualcomm25,7003Cisco Systems52,70059Goldman SachsGroup24,88020Exxon 002Wal-Mart Stores23,30075Procter & Gamble45,00038Intel23,30014Citigroup43,80041AbbVie ies23,00091Orac
Fortune 500 companies are holding more than 2.1 trillion in accumulated profits offshore for tax purposes. Just 30 Fortune 500 companies account for 65 percent of these offshore prof-its. These 30 companies with the most money offshore have booked 1.4 trillion overseas for tax purposes. Onl
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