Thursday, October 18, 2012

How The U.S. Is Squandering As Much As $430 Billion In Corporate Tax Revenues

Each year, multinational corporations based in the United States shelter $1.5 trillion in profits in other countries, and because the U.S. doesn’t tax offshore profits, that money is not subject to the corporate income tax. Corporate profits kept offshore don’t face American taxation until they are repatriated — that is, brought back to the United States.

When companies repatriate money, they are supposed to pay the difference between the U.S. corporate tax rate and the rate they presumably paid to the country where the money was kept. But Congress has little knowledge of how, or whether, those overseas profits are taxed by other nations.

Some companies, however, disclose their overseas tax rates, and when Citizens for Tax Justice analyzed 47 such companies, it found that many pay a low tax rate that would force them to pay close to, if not all of, the 35 percent repatriation rate. The top 10 companies, CTJ found, would all pay at least a 32 percent upon repatriation, meaning they have paid very little in other countries:




The 47 companies CTJ analyzed would pay an average rate of 27 percent on the money they hold overseas if they had to face the corporate income tax. If the other 235 Fortune 500 companies that offshore profits paid the same average rate, it would result in $328 billion in revenue for the U.S. government. “Added to the $105 billion tax bill estimated by the 47 companies who did disclose, this means that taxing all the ‘permanently reinvested’ foreign income of the 285 companies could result in $433 billion in added corporate income tax revenue,” CTJ found.

President Obama has proposed implementing a minimum tax on overseas profits that would help recover much of the lost revenue. Such a tax would limit corporations’ ability to stash profits overseas, and combined with other corporate tax reforms he has proposed, it would raise between $200 billion and $300 billion.

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