The Tax Giveaway That Left Thousands Without Pay

By Amy Zhang

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.


Coalition Pushes Treasury to Defend Anti-Inversions Safeguard

Alliance of Good-Governance Groups Submits Comments in Support of Rules Combating Earnings-Stripping

WASHINGTON, D.C. — In comments submitted to the U.S. Department of the Treasury on Monday, good government watchdogs called on the administration to protect a recent safeguard aimed at combating offshore tax avoidance.


Treasury Toying with Making Tax Avoidance Easier

By Michelle Surka

Sometimes the long drive towards a more equitable and reasonable tax system feels like it’s one step forward, two steps back.

This month, the two steps back we risk taking come in the form of unraveling a Treasury rule established under the Obama administration. Thanks to an executive order from the Trump administration, Section 385 is currently being reviewed by the Treasury Department. The rule takes aim at curbing corporate tax haven abuse — the hallmark of a tax system rigged for the few biggest multinational corporations. Preliminary estimates from Treasury found that it’s impact on offshore tax avoidance would be significant considering that the rule would raise $7.4 billion over 10 years.


World Leaders Gathered for Another Paris Agreement, and the U.S. Was Noticeably Absent

By Jacob Wills

Tell me if you’ve heard this before:  Nations from around the world gathered in Paris to sign a multilateral agreement that had been negotiated over several years with the U.S. as a leading partner.   In the end, the U.S. was conspicuously absent from the ceremony and did not sign onto the final agreement.

I, of course, am referring to an effort to combat aggressive corporate tax avoidance and address the wealth-draining concerns over the growth of tax havens. See FACT’s statement on the event.  The agreement was a part of the multilateral initiative on Base Erosion and Profit Shifting (BEPS) negotiated through the Organization for Economic Cooperation and Development (OECD).  Over seventy countries moved forward with an agreement to combat tax avoidance by amending bilateral tax treaties.