The U.S.’s top 50 public corporations have $1.6 trillion stashed offshore, and current tax reform proposals by President Trump and Congressional leadership will only make the problem worse.
Cross-posted from Oxfam America’s “Politics of Poverty” blog.
This week, millions of Americans are filing their tax returns and mailing Uncle Sam a check. At the same time, the 50 biggest public companies in the U.S., including Pfizer, Goldman Sachs, GE, Chevron, Walmart, and Apple, are avoiding taxes while their huge pile of offshore cash grows.
In a new report called “Rigged Reform” Oxfam used corporate financial, lobbying, and investor disclosures to reveal that the 50 largest U.S. companies used an opaque and secretive network of at least 1,751 subsidiaries in tax havens to avoid paying their fair share of taxes.
Resisting calls to “drain the swamp,” these companies sink deep in the DC muck and mire—with eye-popping results. The report, which updates Oxfam’s analysis from our “Broken at the Top” report last year, reveals that since 2009, these 50 companies alone have spent $2.5 billion in federal lobbying—almost $50 million for every member of Congress. Oxfam estimates that for every $1 these companies spent lobbying on tax issues, they received an estimated $1,200 in tax breaks.
The corporate lobby is already out in force in this current round of tax negotiations. The lead tax writer in the House of Representatives, Ways and Means Chair Kevin Brady (R-TX), has publicly trumpeted the access that favored industries like large banks have gotten to enable the bill authors to “get it right” in the eyes of bank lobbyists. “They’re in with our tax team on a weekly basis. So we’ll get that one right too. We’re getting a great response from them.”
Not surprisingly given the access that Big Business enjoys, reforms proposed by President Trump and Congressional leaders will only further rig the rules in favor of the rich and powerful, deepen the inequality crisis, and harm poor families in the U.S. and in developing countries worldwide.
Every year rigged tax rules cost Americans approximately $135 billion in corporate tax dodging and sap an estimated $100 billion from poor countries—revenue that should go towards building schools, bridges and hospitals. The losers in this rigged game are small businesses, working families, and the poor who cannot deploy armies of lobbyists to preserve their favorite tax loophole.
The report does not accuse any of the companies of acting illegally—rather, Oxfam’s analysis demonstrates how the current tax system permits companies to dodge hundreds of billions of dollars of tax within the bounds of the law—an even more shocking scandal.
Even as these 50 companies earned over $4.2 trillion in profits globally, they used offshore tax havens to lower their effective overall tax rate to just 25.9 percent according to the most generous estimate of their tax payments, well below the statutory rate of 35 percent and even below average levels paid in other developed countries.
Oxfam estimates that the top 50 U.S. companies would stand to gain between $312-327 billion from the repatriation holidays proposed by President Trump and the House GOP. Just four companies—Apple, Pfizer, Microsoft and General Electric—together could potentially pocket as much as $132 billion in new tax breaks from this single policy change. These gains will go disproportionately to the wealthiest 1 percent—further widening inequality.
The report also reveals that the Border Adjustment Tax, proposed by the House GOP, will harm poor and middle class Americans and could cost poor countries more than what the U.S. spends on poverty-focused foreign aid. As a direct result of this proposal, poor countries could face rapidly increasing costs in servicing their debts, which would drain resources needed for schools, hospitals and other basic services that help pull their citizens out of poverty.
At the same time, President Trump’s budget would severely cut or abolish programs that provide low-income Americans with affordable housing, job training, energy assistance, rehabilitated homes in neighborhoods hard-hit by foreclosures, and food delivery to homebound seniors. At a time of unprecedented global crisis, with 65 million people forced to flee their homes and up to four famines looming, the cuts would also devastate U.S. leadership to save lives and help the world’s poorest and most vulnerable.
We’re calling on Congress to go back to the drawing board on its tax reform plans and start over with measures that do not further exacerbate inequality. Congress must also work to enable cooperation with other countries that are struggling to prevent tax abuse rather than compete with other nations in a mutually destructive race to the bottom. The Corporate Tax Dodging Prevention Act and the Stop Tax Haven Abuse Act are just two reasonable measures that would simplify the tax code and ensure companies pay their fair share.
Regardless of whether Congress passes tax reform, multinational companies have a responsibility to push for a more equitable and fair tax system. Doubling down on secrecy and complex artificial tax structures has real costs for companies. Apple, Facebook, Pfizer, McDonald’s, Amazon, and Starbucks are just a few of the companies that come under intense regulatory and reputational scrutiny—with multi-billion dollar consequences.
More transparency—on both tax and lobbying—is a necessary first step. Companies should avoid secrecy by publishing their revenues, profits, taxes, assets and number of employees on a country-by-country basis and publicly disclosing all contributions made to policymakers, trade associations, think tanks and other political entities to influence tax policy.
Companies should commit to paying a fair share by paying taxes where they do business and refrain from using aggressive tax planning practices, like the abuse of offshore tax havens, which have no purpose other than reducing their tax bills.
Finally, companies should advocate for a fairer, more equitable tax system by using their influence with public policymakers and other companies to oppose proposed tax reforms that would widen inequality, make the U.S. tax system more tilted toward big business and away from working families, reduce corporate tax revenue in developing countries, weaken international cooperation, and speed up the dangerous “race to the bottom” on corporate tax.
A fair and effective tax system is the lifeblood of an efficient and well-functioning government, allowing for investments in basic services like schools, hospitals, roads, first responders, social safety nets and other vital public services that can address poverty and ensure a thriving business climate. The vast sums that companies have stashed in tax havens should be fighting poverty and rebuilding America’s infrastructure, not hidden in Panama, Bahamas, or the Cayman Islands.
Explore the way big companies rig the system and take action to stop it here.
Robbie Silverman is a Senior Advisor in Oxfam America’s Private Sector Department.