Here’s What Inversions Are Costing Us

Inversions — or tax maneuvers that reward U.S. corporations that declare themselves overseas residents to avoid paying taxes in America — have been in the news a lot lately, because more than 50 percent of these deals have happened in the past five years.  And will cost ordinary Joe and Jill Americans nearly $20 billion over the next decade — critical dollars that could grow and expand our middle class.

Here’s the bottom line: When corporations invert and pay less in taxes, other working Americans have to pay more to help fund the services we all rely on. (Like maintaining the roads and bridges they use to bring their products to market, equipping our schools with the resources they need to educate/train a base of potential employees, and equipping our military to protect their ability to conduct business not just in the US, but across the globe — just to name a few.) Most working Americans don’t have access to fancy accounting tricks — and parasitic corporations shouldn’t be able to stuff their pockets by using such tricks at our expense.

But if that isn’t already beyond the pale, Corporations that have already inverted are getting $1 billion a year in federal contracts, according to Bloomberg News. Clearly, they’ll do everything they possibly can to be less American when it’s time to pay their taxes, but they’ll claim to be more American when it comes to scoring lucrative government-funded projects.  And what they’re not paying?  Well those funds end up picked from our pockets when we, as ordinary Americans, pay our taxes.

What the Treasury Dept has done is essentially the equivalent of sticking a finger in a leaking dyke.  Congress needs to act to eliminate #Inversions and to hold Corporations accountable for pay their fair share.  Currently, two bills have been introduced and are sitting in Committee: HR5278 in the House, and S2704 in the Senate.  Each bill has been introduced by a Democrat and NO Republicans have signed on as sponsors.  It is well past time that we insist they STOP rewarding parasitic corporations that choose to desert America.  These companion bills titled, the No Federal Contracts for Corporate Deserters Act, would bar parasitic “inverted” corporations from getting U.S. government contracts once they change their corporate address to avoid U.S. taxes.  The 113th Congress is coming to a close and we need to pressure Congress to pass a No Federal Contracts for Corporate Deserters Act BEFORE the closing gavel on the 113th Session.

Advertisements

Stop Shopping Tax Dodgers!

Some Corporations Are Moving Addresses Overseas To Dodge Paying Fair Share Of U.S. Taxes

walgreens

We talk a lot about the grave problem of inequality and how our economy is not working for most Americans. One of the causes of this big problem is that corporations and the wealthiest are taking advantage of the system, exploiting tax loopholes, and rigging the game to benefit themselves, often at the expense of everyone else. The latest tax-dodging tactic that some corporations are considering using is a perfect example of this rigged system–and demonstrates why we need our legislators to take decisive action to stop it.

What Is The Problem?
A loophole in the tax code essentially allows a corporation to renounce its corporate citizenship in the United States, move its address overseas by merging with a foreign company, and dodge its U.S tax obligations by paying most of its taxes to a foreign government with lower tax rates than the U.S. The process takes place primarily on paper — most corporate operations remain here. The corporations that do this want all the benefits of being an American company without paying their fair share of taxes. That makes the rest of us pick up the tab.

The practice has become known as “inversion.” But what it really amounts to is desertion. And it could cost Americans tens of billions of dollars.

Who Is Taking Advantage?
There are 47 firms in the last decade that have exploited this loophole, according to new data compiled by the nonpartisan Congressional Research Service. But it’s a hot topic again because at least a dozen U.S. firms are currently considering taking advantage of it.

One of those corporations is Walgreen. The company has always prided itself on being America’s go-to pharmacy: from 1993 to 2006, it had the slogans “The Pharmacy America Trusts” and “The Brand America Trusts.” A biography of the company is entitled, “America’s Corner Store: Walgreen’s Prescription For Success.” Walgreen chief executive Gregory D. Wasson has said the company is “proud of our Illinois heritage.”

At the same time, Walgreen is currently considering merging with European drugstore chain Alliance Boots and move to Switzerland as part of a plan to dodge up to $4 billion in U.S taxes. The company that gets almost a quarter of its $72 billion in revenue directly from the government through Medicare and Medicaid is trying to reap even more profits while leaving taxpayers holding the bag.

Walgreen isn’t the only one. Pfizer, the pharmaceutical company, tried merging with the smaller U.K.-based AstraZeneca earlier this year and switch its address, where the tax rate is lower. It was estimated the move would save them at least $1 billion a year in tax obligations to the U.S. (the deal ultimately didn’t go through). Medtronic, a medical device company, plans to move its corporate address to Ireland, a tax haven, to avoid paying U.S. taxes on $14 billion. Chiquita, the banana distributor, is also heading to Ireland after acquiring Fyffes. These tax dodges, as Fortune magazine calls them in this week’s issue, are “positively un-American.”

What Can Be Done?
President Barack Obama’s 2015 budget proposes making these corporate desertions more difficult by raising the minimum levels of foreign ownership required to 50 percent (currently it is just 20 percent), which means that U.S. corporations could not move their address abroad unless they actually ceded a controlling interest to foreign owners. Congressional Democrats have made similar proposals. Treasury Secretary Jack Lew recently called for more “economic patriotism” and urged Congress to “enact legislation immediately” to close the loophole. Leaders on both sides of the aisle want comprehensive tax reform, but finding common ground in the current Congress could take a while. The simple fact is that as more and more companies exploit this loophole, a solution for this problem is needed right away–and Congress has the power the solve it.

BOTTOM LINE: More and more corporations are taking advantage of a tax loophole that helps their bottom line while costing American taxpayers billions every year. These companies want to continue to take advantage of the things that make the U.S. the best place in the world to do business, while at the same time pay less than their fair share by moving their corporate addresses overseas. That desertion is unfair, unpatriotic, and has got to change.

Like CAP Action on Facebook and follow us on Twitter!


This material [the article above] was created by the Center for American Progress Action Fund. It was created for the Progress Report, the daily e-mail publication of the Center for American Progress Action Fund. Click here to subscribe.

Transplanting Taxes from Corporations to the Rest of Us

American taxpayers are increasingly picking up the tab for unpaid corporate taxes.

— by Scott Klinger

Scott Klinger

Today, corporate profits are setting all-time records while middle class families continue to struggle financially. These trends are intertwined.

Whether you’ve clicked to send your tax forms to the IRS along the cyber-highway or dropped your return in the old-fashioned blue mailbox, you’ll be paying extra to cover the growing amount of taxes that the nation’s clever corporations are shunting onto individual taxpayers.

Officially, the U.S. corporate tax rate stands at 35 percent, but in practice it’s far lower. Corporations have lots of tricks in their box of tax-avoidance tools.

Consider Pfizer’s track record. The drugmaker increased its offshore profits by $10 billion in 2012, boosting its offshore stash to $73 billion — all of it untaxed by Uncle Sam. Like most pharmaceutical companies, Pfizer registers its patents in a low-tax offshore haven, and then charges a high price for the use of this “intellectual property.” Doing so, it shifts all of its U.S. profits offshore, avoiding U.S. taxes and bloating its overseas bank account.

Pfizer’s tax dodging prowess has earned it a gold medal in the sport, but it has also drawn unwanted attention from the Securities and Exchange Commission. The SEC wrote to Pfizer last year asking them to explain four years of large losses in their U.S. operations despite reporting about 40 percent of their sales on American soil. Undeterred by the SEC investigation, Pfizer added a fifth year of U.S. losses to the string in 2012.

Imagine for a moment one of the physicians that prescribes Pfizer’s products taking their diploma off their office wall, carefully packing it up, and shipping it to a bank vault in the Cayman Islands. That diploma represents the doctor’s intellectual property. Without it, they would not be able to practice their profession.

After each visit, patients approaching the check-out desk would be given their bill and an envelope to mail their check to a post office box in the Cayman Islands. Faced with confused looks, the receptionist cheerfully explains, “Well, we have to pay for the use of the skills represented by the diploma, which is housed in the Caribbean.”

The corporate offshore tax dodge that shifts $90 billion of tax expenses onto individual taxpayers this Tax Day is just that crazy. Just like having a doctor’s diploma parked in the Cayman Islands does nothing to improve the quality of care, having corporate profits transferred from America to tax haven nations provides no enhanced benefits in terms of product quality or service. In other words, there is no economic value. It only serves to add more to already-overflowing corporate coffers.

Taxing Economics, an OtherWords cartoon by Khalil Bendib

Taxing Economics: Tax havens put the corporate cart before the individual horse by Khalil Bendib

In the 1950s, corporations paid nearly a third of the federal government’s bills. Last year, thanks to the antics of Pfizer and other examples of overly creative accounting, corporate income taxes accounted for less than a tenth of Uncle Sam’s total revenue. This dramatic shortfall shows up in two ways — federal budget deficit growth and the growing trend of individual taxpayers paying an increased share of the costs of government.

Only about two in every thousand American businesses are even eligible to play this game, and far fewer actually do. Most business owners are proud to pay taxes they know support schools, good infrastructure, and national security.

If tax-dodging corporations were people, they might say thanks to the responsible taxpayers who are picking up their share of unpaid taxes. But since they aren’t human, allow me to say on their behalf, “Have a Nice Tax Day.”

Scott Klinger is an Associate Fellow of the Institute for Policy Studies.  Distributed via OtherWords. OtherWords.org