WASHINGTON, June 5 (Reuters) - Most Fortune 500 corporations have units in offshore tax havens that they use to avoid paying U.S. taxes through “accounting tricks,” two left-leaning tax activist groups said on Thursday.
In a report that comes amid increased attention to corporate tax avoidance worldwide, the groups said U.S. multinationals each year avoid paying about $90 billion in federal income tax.
“Many large, U.S.-based multinational corporations avoid paying U.S. taxes by using accounting tricks to make profits made in America appear to be generated in offshore tax havens - countries with minimal or no taxes,” said Citizens for Tax Justice and the U.S. Public Interest Research Group (PIRG).
About 72 percent of Fortune 500 companies had subsidiaries in low-tax jurisdictions in 2013, with most of these units located in the Cayman Islands or Bermuda, said the report.
“These subsidiaries are often shell companies with few, if any employees, and which engage in little to no real business activity,” it said.
Big corporations regularly defend their tax planning practices as legal and in the best interest of shareholders who want companies to pay as little tax as possible.
But fiscal constraints facing many governments, as well as a step-up recently in the aggressiveness of some tax-avoidance strategies, have fueled a political backlash.
Earlier this week, the Paris-based Organisation for Economic Co-operation and Development held a conference in Washington on its effort to rein in corporate tax avoidance, launched last year at the request of the G20 group of leading world economies.
The OECD project has a long way to go, with completion not expected until next year, and it will not have the force of law. But lawyers and accountants agree that changes may be ahead if national legislatures enact the OECD’s recommendations.
The U.S. Congress has not thoroughly overhauled the U.S. tax code since 1986, leaving it riddled with loopholes that corporations, families and individuals can take advantage of.
“The loopholes in America’s corporate tax (code) have grown so outrageous that our policymakers should be embarrassed,” said Steve Wamhoff, legislative director at Citizens for Tax Justice, which studies tax policy and often criticizes corporations.
“The data in this report demonstrate that a huge portion of the supposedly ‘offshore’ profits are likely to be U.S. profits that are manipulated so that they appear to be earned in countries like Bermuda or the Cayman Islands where they won’t be taxed. Policymakers should close the loopholes that make this manipulation possible,” Wamhoff said. (Reporting by Patrick Temple-West; Editing by Kevin Drawbaugh and Jonathan Oatis)