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Shopping for a Tax Haven: How Nike and Apple Accelerated Their Tax Avoidance Strategies, according to the Paradise Papers

A year and a half after the release of the Panama Papers, a new set of data leaks, the Paradise Papers released by the International Consortium of Investigative Journalists (ICIJ) provides important new information on the tax dodging of wealthy individuals as well as multinational corporations.

The leaked data, about 13.4 million files in total, exposes the tax avoidance schemes and strategies of wealthy and powerful individuals, as well as large corporations. More than 7 million of the files were obtained from the offshore law firm Appleby. The 119-year-old firm is a leading member of the global network of lawyers, accountants, bankers and other operatives who set up and manage offshore companies and bank accounts for clients who want to avoid taxes or keep their finances under wraps.

It is no secret that corporations like Nike and Apple are holding billions of dollars offshore for tax avoidance purposes, but the Paradise Papers give us a deeper look into what these tax avoidance schemes look like, and show that Apple’s leadership has aggressively moved to reinvent these schemes while simultaneously proclaiming their innocence.

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House Tax Plan Would Make Offshore Tax Avoidance Substantially Worse

The release of the Paradise Papers has once again brought the issue of offshore tax avoidance to the forefront of public discussion. The papers expose the complex structures that companies such as Apple and Nike have pursued in recent years to pay little to nothing in taxes on their offshore earnings.

Yet even as these revelations make headlines, House Republicans are moving forward with major tax legislation, the Tax Cuts and Jobs Act, that would reward the worst tax avoiders and make it even easier for multinational companies to avoid taxes.

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Territorial: The Hidden Danger Beneath the Tax Rate Debate

Our tax system is fundamental to our democracy, delineating who pays the costs of a functioning civilization. But the system is broken, leaving an undeniable imbalance between the working and middle-classes and the wealthy and multinational companies. It would seem to follow then that the focus of tax reform should be around correcting this imbalance by targeting those that have gamed the system and flagrantly avoided taxation. Yet, the priority for Congress and the administration seems to be to exacerbate tax avoidance with greater incentives for shifting profits offshore.

There is currently $2.6 trillion booked offshore — untaxed — by multinational companies. This is the result of a gaping loophole for multinationals known as deferral, where a company can delay paying taxes until the profits are “repatriated” to the U.S. The administration has frequently cited this number as a reason our tax code needs “reform,” and, on that point, there is broad agreement. Our tax system undoubtedly needs reform, though, their solution—to simply not tax offshore profits—misses the point.

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The Anonymous Companies That Protect Human Traffickers

Human trafficking is one of the most insidious crimes in our world today.  It’s a business that profits on depriving basic rights — buying and selling them for forced labor or sexual exploitation. Unfortunately, it is the third-or fourth-largest illegal industry in the world (depending on how one measures) — and one that is growing rapidly.  It is estimated to amount to $150 billion in profits each year while keeping 21 million people in slavery — at least that we know of.

Human traffickers hide in the shadows, making them extremely elusive to authorities. Vanessa Chauhan, a strategic engagement adviser at Polaris and FACT Coalition member, says, “It’s a hidden crime and unless you’re looking for it, you’re not going to find it.”  To remain hidden, some traffickers use illicit schemes, including complex webs of anonymous companies, that allow them to quietly launder the proceeds from their illicit activity and shield them from accountability.

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The Tax Giveaway That Left Thousands Without Pay

A 2004 Offshore Tax Holiday Left 600,000 Jobless. A Decade Later, Congress Is at Risk of Making the Same Mistake
In 2004, the grass seemed greener on the other side — overseas where multinational corporations kept stashing profits.  A corporate tax policy (known as “deferral”) allows U.S. corporations to defer taxes on their profits booked offshore until they are returned to the U.S.  By 2004, deferral had led to a cash hoard of $527 billion, equivalent to 4.3 percent of GDP, amassing offshore.

Back then, President Bush signed the American Jobs Creation Act of 2004 (AJCA) believing that bringing home the stockpiles of cash would mean huge jobs and growth here in the U.S. The act provided a “tax holiday,” allowing corporations to return their deferred profits at an astonishingly low 5.25 percent — instead of the statutory 35% rate.

Companies — including Pfizer, Merck & Co., Hewlett-Packard, Johnson & Johnson, and IBM — immediately took advantage.  Together, these five corporate giants repatriated $88 billion from their offshore accounts located in well-known tax havens such as Switzerland, the Cayman Islands, and the Bahamas. According to the IRS, some 843 companies followed suit resulting in the repatriation of $312 billion in qualified earnings.  In total, the companies received $265 billion in tax deductions between 2004 to 2006.

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From Pakistan to Park Lane via Panama

How Prime Minister Sharif’s Family Used Anonymous Companies
Over a year on and the effect of the Panama Papers continues to reverberate.

 Last week, the leaks claimed another political scalp: Pakistan’s Supreme Court has removed Prime Minister Nawaz Sharif from office. The leaks showed how Sharif and his children were linked to prestigious Park Lane apartments in London through a complex web of anonymously owned British Virgin Island (BVI) companies.

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