538 Organizations Call on U.S. Senators to Support the Stop Tax Haven Abuse Act

WASHINGTON – The South Carolina Small Business Chamber and the American Sustainable Business Council signed onto a letter released yesterday by the Americans for Tax Fairness and the Financial Accountability & Corporate Transparency (FACT) Coalition  that included 538 organizations calling on Members of the U.S. Senate to support the Stop Tax Haven Abuse Act (S. 1533).

The legislation, introduced by Senators Carl Levin (D-MI), Mark Begich (D-AK), Jeanne Shaheen (D-NH) and Sheldon Whitehouse (D-RI), would close tax loopholes that encourage U.S. corporations to move jobs, profits and operations offshore and avoid paying their fair share of taxes.

Some tax loopholes allow corporations to use complex accounting schemes to make it appear that profits earned in the United States are actually generated in other countries, often a tax haven with little or no tax on profits. This enables those corporations to substantially lower the amount of U.S. income taxes they pay. By closing some of these loopholes, the Levin bill would raise $220 billion over ten years, according to the Joint Committee on Taxation. This could stop some or all of the impending next round of automatic spending cuts under the budget sequester, which are projected to cost 800,000 jobs, according to the Congressional Budget Office.

The 538 letter signers represent tens of millions of Americans, many of whom are still feeling the effects of the “Great Recession” while multinational corporations book record profits. The list of signers includes some of the largest public and private sector unions, as well as many of the most well-known non-profits in America working for the public good.

“As Washington begins a new budget debate, lawmakers should replace the next round of budget cuts with new revenue raised by closing offshore tax loopholes,” said Frank Clemente, campaign manager of Americans for Tax Fairness, which co-led the effort to secure letter signers. “Too many Members of Congress express support for the idea of closing tax loopholes, but never say how they would do it. The answer is to support the Stop Tax Haven Abuse Act.”

“When corporations use tax havens to dodge the taxes they owe, the rest of us pick up the tab, either through higher taxes, cuts to important programs, or a bigger deficit,” said Dan Smith, Tax and Budget Advocate for U.S. PIRG, which is a member of the FACT coalition, which co-led the letter-signing effort. “Some budget decisions are tough, but closing the offshore tax loopholes that let large companies shift their tax burden to the rest of us is a no-brainer. Congress should pass this legislation to level the playing field for small businesses and restore fairness to our tax system.”

Among other things, the letter explains that this legislation would close or tighten tax loopholes that have been used by some of the most profitable multinational corporations – Apple, Hewlett-Packard, Microsoft and Nike – to avoid paying their fair share of taxes.

Nations pulling together to fight multinational corporation freeloaders

Last month in Great Britton the collection of the world’s top eight economic nations (the G8) decided to get tough on multinational corporations evading paying taxes.  Last week the top 20 economic nations (the G-20) endorsed the outline of a plan to do the same thing. 

The full plan by the Organization for Economic Cooperation and Development (O.E.C.D.) will be presented to the G-20 in St. Petersburg, Russia, in September.  In its preliminary report the O.E.C. D made it quite clear that multinational corporations have been gaming the tax codes of countries (mostly in legal ways) to shift tax burdens to small businesses and individuals. 

However, even if the G-20 supports the final report, it will still be up to each individual country to pass the needed legislation to make the plan work.

Two years ago I joined the U.S. Senate’s leading advocate on this issue, Carl Levin, in a D.C. press conference to roll out the Stop Tax Haven Abuse Act.  Unfortunately, that effort was unsuccessful but Senator Levin is our leader and is quoted as saying in recognition of the G8 and G-20 news that there is “growing global demand for reining in corporate offshore tax abuses.”  

As Senator Levin approaches his retirement from the Senate, Congress joining the rest of the world’s big economic nations in taking significant steps to make multination corporations pay their global taxes would be a great tribute to his public service.  And I, the South Carolina Small Business Chamber, American Sustainable Business Council and all the other truly small business organizations stand ready to make that recognition a reality.

The G8 nations and small businesses have something in common

The split in business opinion (see story below) on whether the economic world powers represented at the G8 summit should crack down on offshore tax havens that deprive nations of corporate tax revenue is easily understood. 

Organizations like the U.S. Chamber of Commerce, which represents multinational corporations, want to protect their big dues paying members from paying their fair share of taxes.  Organizations representing small businesses, like the American Sustainable Business Council, want to protect their members from subsidizing the government services multinational corporations receive from the countries where they avoid paying taxes. 

Multinational corporations are the “takers” and we are the “givers”.  And we’re tired of getting screwed.  Apparently so are the G8 nations based on their declaration this morning on combatting tax avoidance.

(In the interest of full disclosure, I serve as chairman of the American Sustainable Business Council Action Fund.)
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The Wall Street Journal
June 18, 2013

The Morning Risk Report: Companies Divided on Taxation as G8 Zeroes In

The business community is making noise about one of the top agenda items at this week's G8 summit, corporate taxes, but the conversation sounds more like a shouting match than a chorus.

By Christopher M. Matthews

The business community is making noise about one of the top agenda items at this week’s G8 summit, corporate taxes, but the conversation sounds more like a shouting match than a chorus. Dueling letters sent to the White House this month about corporate taxation, and more specifically, cracking down on tax havens, seem to indicate that many companies don’t see eye-to-eye on the issue.

British Prime Minister David Cameron, who’s hosting the leaders of the Group of Eight industrialized nations, has said corporate taxes are a top priority. The issue is one that President Obama, who hopes to reform the tax code, can get behind. “Tax avoidance is as much about countries and country rules as it is about companies, because the loopholes that the companies use are the results of the rules that countries set,” White House international-economic-policy coordinator Carolyn Atkinson, told reporters before leaving for Europe. Obama hopes to translate international support into political capital back home.

He’ll need it, because back in the U.S., there is little consensus on the issue, even among the corporate community that arguably stands to lose the most. In a letter to the White House earlier this month the U.S. Chamber of Commerce, the Business Roundtable, and others expressed concern about aggressive efforts to crack down on corporate tax evasion. “Recent tax initiatives in a number of foreign countries, including several of our G8 partners, appear to be primarily targeting American companies with global operations in the guise of combating tax avoidance, potentially harming both the U.S. companies’ competitive position and the U.S. Treasury,” they wrote in the letter.

Meanwhile, the American Sustainable Business Council, which represents 165,000 businesses, and non-profit group Avaaz sent competing letters to the White House. Avaaz said its letter was signed by 15,000 business owners. “Tax dodging deprives our nation of revenue needed to maintain and modernize the infrastructure and services underpinning a strong economy,” ASBC Executive Director David Levine wrote in the letter. The council also released a poll that found that 85% of small business owners oppose a territorial tax system, which the Chamber advocates and which critics say allows U.S. companies to shield overseas profits from domestic taxation. At least one major U.S. company has put its name on the issue, as Google’s Eric Schmidt said he welcomed the taxation debate (if not exactly advocating a specific change.)

http://stream.wsj.com/story/latest-headlines/SS-2-63399/SS-2-255673/ 

 

Irish seeing red from missed green

When it was reported recently that Apple has avoided paying U.S. corporate income taxes on tens of billions of dollars by claiming the money really belonged to its Irish subsidiary, the hope was that Congress would use the revelation to seriously look at closing these tax loopholes used by multinational corporations. 

But, of course, our Congress is pathetically impotent to deal with the real problems of the country.  It’s too busy playing politics ALL THE TIME.  Plus, Apple is an influential company and it isn’t doing anything that other influential multinational corporations aren’t doing.

So instead of our Congress addressing this tax issue we might just have to rely on Ireland to fix the problem because Apple hardly paid any tax to that country on all those billions.  Why?  Because Irish tax law says that to be taxable income the corporate decisions have to be made in Ireland, which, of course, they aren’t in Apples’ case. 

The Ireland Independent exposed Apples’ tax avoidance in that county with a story yesterday under the heading, “Biggest Irish companies paid tax at eight times Apple's rate”. 

And if Apple ticking off the Irish business community isn’t bad enough, the President of the Irish Catholic Bishops’ Conference, Archbishop Sean Cardinal Brady, signed a letter to the leaders of the G8 countries this week addressing tax evasion and taxation.  The letter cited the Catechism of the Catholic Church: 

“Submission to authority and co-responsibility for the common good make it morally obligatory to pay taxes…” (No. 2240).

Now if we can only get the leprechauns to rise up against Apple, we can shut down at least this one offshore tax haven.

 

Tax havens unfair to small businesses

The Washington Post Published: April 22

The latest deficit-reduction plan offered by Erskine Bowles and Alan Simpson supports the interests of big business at the expense of the United States’ small businesses by calling for adoption of a territorial tax system. In two recent polls, small-business owners have soundly rejected making abuse of offshore tax havens by multinational organizations legal and permanent.

A March poll sponsored by the American Sustainable Business Council and Main Street Alliance found that 85 percent of those surveyed, including 67 percent of Republican small-business owners, opposed a territorial tax system that would exempt foreign profits from U.S. taxes. The National Small Business Association reported that only 16 percent of small business owners they polled supported a shift to the territorial tax system.

Elected leaders should not support any proposal for taxing multinational corporations that small business owners view as wrong and unfair.

Frank Knapp Jr., Washington

The writer is vice chairman of the American Sustainable Business Council.

Original Article

Clocks ticking. Do you know where the multinational profits are?

The clock is ticking and your personal tax filings are due on Monday.  If you are like me you asked for an extension on your business tax filing that was due before this (S-corps and LLCs).

So as you rush to get the taxes done or are checking with your tax preparer to see how it is going, take a few minutes to see that your same anxiety is not shared by most multinational corporations that won’t be sending Uncle Sam any income taxes—or for that matter don’t have to pay any.

Watch the clips below and then raise your voice with your members of Congress.  We’re subsidizing these giants because Congress won’t make them pay their fair share of taxes.

What do America's Biggest Tax Cheating Corporations Want Now? http://youtu.be/_GizC6OnVpM

• Big Corporations are pushing for a Territorial Tax System. 
Find out what it is and how it's going to affect Americans!

How Do Billion-Dollar Corporations Cheat America Out of Tax Revenue? http://youtu.be/miO8cuIhYrs

• This tells how corporations use transfer pricing to shift profits offshore and get out of paying taxes in the U.S. 

The Truth About Corporate Tax Rates http://youtu.be/YsWq2kaD-gs

The tax rate is 35%. Corporations complain it's too high. But how much are they really paying?

Speaking of Big Corporate Tax Cheats...  http://youtu.be/tVPgpoN-RzY

• Carl Gibson, co-founder of US Uncut, speaks on the Mississippi State Capitol steps about how individuals pay more taxes than many multinational corporations. 

 

Look who your taxes are subsidizing

As America gets ready to finalize their taxes, you need to check out these three very short (less than 75 seconds) video clips to get your blood really boiling.  I am featured in the third clip.

 

Small Businesses Picking Up the Tab for Multinational Corporations?  http://youtu.be/4AicxgXgmZc

• Small businesses can't escape the corporate tax rate, multinational corporations can - so who ends up paying?  Isn't it time to level the playing field?

How Do Giant Corporations Get Away with "Legal" Tax Cheating?  http://youtu.be/ubjGmCIbrjQ

• See how multinational corporations lobby corporations to write their own tax laws. 

Who Pays for Corporate Tax Dodgers? YOU DO. http://youtu.be/XRNBNzJ42VM

• How multinational corporate tax cheating hurts the average tax payer.

More tomorrow.

Small business opposes multinational corporations' tax avoidance

The Hill's Congress Blog
April 9, 2013

 

By Frank Knapp, Jr., vice chairman, American Sustainable Business Council

In our highly partisan environment there seems to be very few issues that Republicans, Independents and Democrats agree on. This partisanship is easily seen in Congress but is also alive with voters across the country. Small business owners are often no different than their customers in demonstrating divergent opinions on issues depending on their political preferences.

So when we find an issue on which small business owners agree, regardless of partisan leanings, we should take notice. And when that agreement centers on one of them most contentious matters that Congress will soon be addressing, our elected officials in Washington need to pay close attention. Such is the case involving federal tax fairness between small business and large, multinational corporations.

Small business owners are keenly aware that multinational corporations are legally escaping paying much, and often all, of the highly publicized 35 percent U.S. corporate income tax rate. In a poll released early last year by the American Sustainable Business Council (ASBC) and others 80 percent of the small business owners surveyed said that U.S. multinational corporations using accounting loopholes to shift their U.S. profits to offshore tax havens is a problem. Seventy-five percent said that big corporations using tax loopholes harms their own small business.

Accounts of giant businesses like Boeing, General Electric, Pfizer, Microsoft and Honeywell International using offshore tax loopholes to dramatically lower their taxes – often to zero -- are all too common. U.S. Public Interest Research Group just released report showing that each of America’s small businesses on average picks up the tab for $3,067 to cover the costs of tax avoidance by U.S multinational corporations playing the offshore profit-shifting game.

It is clear to small business owners that the ability of these large corporations to minimize their tax liability through offshore tax loopholes is contributing to our nation’s budget problems and is harmful to the small business community. This awareness of multinationals shirking their tax responsibility has resulted in a bipartisan small-business owner consensus on the need of large, multinational corporations to pay their fair share of taxes.

Last month ASBC and the Main Street Alliance (MSA) commissioned a scientific telephone survey of over 500 small businesses across the country. As national business organizations representing small and medium size companies, both ASBC and MSA have advocated for equitable taxation on big business profits to invest in the country’s infrastructure and address the national debt.

Here are some of the overwhelmingly bipartisan consensus results of that ASBC/MSA small-business owner poll just released.

• More than three quarters of small business owners support closing overseas tax loopholes with a unitary combined reporting system:
 75 percent or more of Republican, independent and Democratic small business owners support this approach, which is successfully used by states to stop corporations from shifting the location of profits to avoid taxes.

• More than four out of five small business owners oppose a proposal to institute a territorial tax system (a system that would eliminate U.S. taxes on profits made or shifted offshore):
85 percent of small business owners oppose a proposal for a territorial tax system. Across party lines, at least 67 percent strongly oppose the proposal.

• Small business owners support ending deferral of taxes on foreign profits and requiring US corporations to pay income taxes on income earned overseas:
When asked if foreign earnings of U.S. corporations should be taxed after given credit for foreign taxes paid, 64 percent of small business owners expressed support. Within each party affiliation, at least 62 percent, expressed support.

These results should send a clear signal to Congress and the President from the country’s small business owners. The priority for reforming our nation’s tax code is to stop multinational corporations from using offshore tax havens to avoid paying their fair share of taxes. And these elected leaders are also put on notice to not support any proposal for a territorial tax system for multinational corporations that would lock in what small business owners of all political persuasions view as completely wrong and unfair.

Knapp is vice chairman of the American Sustainable Business Council and president and CEO of the South Carolina Small Business Chamber of Commerce.

Read more: http://thehill.com/blogs/congress-blog/economy-a-budget/292645-small-business-opposes-multinational-corporations-tax-avoidance#ixzz2PznClNww

New Poll of Small Business Owners

Reveals Strong Bipartisan Opposition to Corporate Tax Loopholes

First Poll on Overseas Tax Haven Reforms Finds Rejection of “Territorial” Tax System

April 9, 2013, Washington, D.C. – Small business owners oppose the current system for taxing U.S.-based multinational corporations, according to a new poll. The national scientific poll released today by the American Sustainable Business Council (ASBC) and the Main Street Alliance (MSA) – two national business policy groups – shows that support for reform is bipartisan and widespread.
 

This new poll is the first to query small business owners on specific policies for addressing overseas corporate tax havens. Current tax law enables companies to defer indefinitely taxes on profits earned overseas. The ASBC-MSA poll tested three possible reforms: ending deferral, instituting a territorial system, and establishing combined reporting. The report of poll results may be found here: http://asbcouncil.org/sites/default/files/library/docs/MSA_ASBC_poll_reportTaxesApril2013.

Key findings from the survey include:

·         More than four out of five small business owners (85%) oppose a territorial tax system, which would permanently exempt offshore profits from U.S. taxation. Across party affiliation, 67% or more are strongly opposed to the proposal.

·         76% of small business owners support closing overseas tax loopholes by implementing a unitary combined reporting system, which would limit the ability of corporations to avoid taxes by shifting profits offshore. A majority (55%) are strongly supportive.

·         64% support ending deferral, a provision of current tax code that allows corporations to indefinitely defer payment of U.S. taxes on profits made or shifted offshore. Across parties at least 62% support this idea.

·         By a margin of more than two to one, small business owners prefer to close corporate tax loopholes rather than cut government programs. Both Democratic and Republican small business owners preferred closing loopholes to cutting spending on education, infrastructure or defense.

·         Respondents in the survey were politically diverse, with a strong plurality of Republicans or Independents who lean Republican: 47% identified as Republican or Independent-leaning Republican; 27% as Democratic or Independent-leaning Democratic; and 26% as Independent or other.

"I’m not afraid as a small business to compete with the big boys," said Henry Passapera, a member of the Main Street Alliance and the co-owner of P&R Trading, an international supplier of airline parts and equipment based in East Rutherford, New Jersey. "But when big corporations use offshore tax havens to avoid their tax responsibility, it puts small businesses like mine at a competitive disadvantage.  If you want to fly the American flag at your corporate headquarters, you ought to pay your fair share of taxes."

“All businesses are hurt when we allow tax loopholes for big companies while cutting budgets for public education, research and infrastructure,“ said Josh Knauer, a business leader in ASBC and President and CEO of Rhiza Labs, a Pittsburgh-based software company. “Tax dollars were a vital component in America's past innovations and infrastructure, fostering economic success. The taxes we pay, wisely invested, are the down payments on our future success.”

“Policy makers now have poll data showing that small business owners are strongly against instituting a territorial system, which would make permanent the broken tax system we have now,” said Scott Klinger, Tax Policy Director for ASBC. “Corporate income taxes as a share of the economy are at a 60-year low, and many U.S. multinational corporations pay higher taxes in foreign nations than they do here. So the last thing we should do is lock in an unearned, anticompetitive deal that will hurt the economy as a whole.”

“Small business owners see two problems with the current system for taxing U.S. multinationals,” said Joshua Welter, Director of Special Projects for MSA. “First, they know we can’t afford these loopholes, since the reduced revenue forces cuts in economy boosting investments, such as education, Social Security and Medicare. Second, the overseas tax structure is a big thumb on the scale for big companies, and a thumb at the nose of small business.”

To view the full survey results, visit: http://asbcouncil.org/sites/default/files/library/docs/MSA_ASBC_poll_reportTaxesApril2013.

Poll results reported here represent findings from a scientific national phone survey of 515 owners of small businesses (with 2 to 99 employees), commissioned by the American Sustainable Business Council and the Main Street Alliance and conducted by Lake Research Partners. The nationwide live phone survey was conducted between March 14-25, 2013. It has a margin of error of +/- 4.4%.

###

The Main Street Alliance is a national network of state-based small business coalitions. MSA and its state affiliates create opportunities for small business owners to speak for themselves on issues that impact their businesses and local economies. www.mainstreetalliance.org

The American Sustainable Business Council and its member organizations represent more than 165,000 businesses nationwide, and more than 300,000 entrepreneurs, executives, managers, and investors. ASBC informs and engages policy makers and the public about the need and opportunities for building a vibrant and sustainable economy. www.asbcouncil.org

 

 

New Study: Offshore Tax Dodging Blows $40 Billion Hole in State Budgets

Congress Poised to Debate Closing Corporate Tax Loopholes, Bring States Budget Relief

Read the Report: www.uspirgedfund.org/reports/usf/hidden-cost-offshore-tax-havens

Washington, February 5th – With states across the country facing dire fiscal crunches and lawmakers in Washington gearing up for more budget showdowns, U.S. PIRG Education Fund released a new study revealing that state budgets were hit collectively with $40 billion in lost revenue from offshore tax dodging last year. Many of America’s wealthiest individuals and largest corporations use tax loopholes to shift profits made in America to offshore tax havens, where they pay little to no taxes. U.S. PIRG Education Fund was joined at the event by Congressman Lloyd Doggett, the Main Street Alliance, the American Sustainable Business Council, and a small business owner.

“Offshore tax abuses undermine public confidence in our tax system. They add to both the deficit and the tax burden imposed on small businesses and individuals that play by the rules,” said Congressman Lloyd Doggett (TX-35), a senior member of the House Ways and Means Committee. “In quantifying the enormous cost to our economy of tax haven abuse, U.S. PIRG has, once again, offered valuable work. More state and federal action is required to ensure that the cost of necessary security and other public services is shared fairly.”

“Tax dodging is not a victimless offense. When corporations skirt taxes, the public is stuck with the tab. And since offshore tax dodgers avoid both state and federal taxes, they hurt everyday taxpayers twice,” according to Dan Smith, Tax and Budget Advocate for U.S. PIRG Education Fund and report co-author. “States should be using that money to benefit the public.”

All told, state taxpayers across the country lost nearly $40 billion last year from offshore tax loophole abuse. To put that amount in context, $40 billion roughly equals the total amount spent by all state and local governments on firefighters in 2008. It’s also enough money to cover the educational costs for 3.7 million children for one full year.

At the national level, offshore tax loopholes cost federal taxpayers $150 billion each year, which would be more than enough to cover the scheduled spending cuts that are set to take effect in just a few weeks.

"Our economic progress is undermined when companies are rewarded for financial manipulation rather than innovation and productive investment," said Bryan McGannon, Deputy Director of Policy at the American Sustainable Business Council.

“When corporations use offshore tax havens to avoid paying their taxes, they’re robbing states of the resources they need to lay the foundations for local, independent businesses to grow and thrive,” said Sam Blair, Network Director for the Main Street Alliance. “They’re also leaving small businesses at a direct competitive disadvantage.”

Tax havens are used by both wealthy individuals and corporations. The study found that states lost $28 billion from the corporate abuse of tax havens and $12 billion from individuals.

As of 2008, at least 83 of the top 100 publicly traded corporations in the U.S. used tax havens, according to the Government Accountability Office. At the end of 2011, 290 of the top Fortune 500 companies reported that they collectively held a staggering $1.6 trillion offshore, a Citizens for Tax Justice report found. By using offshore tax havens, corporations and wealthy individuals shift the tax burden to ordinary Americans, forcing us to make up the difference through cutting public services, growing our already big deficit, or raising taxes on everyday citizens.

“Some budget decisions are tough, but closing the offshore tax loopholes that let large companies shift their tax burden to the rest of us is a no-brainer,” Smith added.

Here are some increasingly notorious ways that some of America’s largest corporations drastically shrink their tax bill:

•    Google used accounting techniques nicknamed the “double Irish” and the “Dutch sandwich,” which involved two Irish subsidiaries and one in Bermuda, to help shrink its tax bill by $3.1 billion from 2008 to 2010.
•    Wells Fargo paid no federal income taxes in 2008, 2009, and 2010, despite being profitable all three years, largely due to its use of 58 offshore tax haven subsidiaries.
•    Microsoft avoided $4.5 billion in federal income taxes over three years by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. The company pays its Puerto Rican subsidiary 47% of the revenue generated from its American sales, despite the fact that those products were developed and sold in the U.S.

You can download the report, “The Hidden Cost of Offshore Tax Havens: State Budgets Under Pressure from Tax Loophole Abuse,” here: www.uspirgedfund.org/reports/usf/hidden-cost-offshore-tax-havens

 

Push multinational corporate tax dodgers over the fiscal cliff

The Wall Street Journal
December 5, 2012

By Carl Levin

America stands at the edge of a fiscal cliff with drastic budget cuts and painful tax increases on the middle class unless we can agree on a comprehensive, balanced deficit-reduction plan.
This challenge lends new urgency to cutting loopholes and gimmicks to avoid paying taxes.

Tax loopholes are one significant cause of the budget deficit, and they add to the tax burden ordinary Americans bear.

The Senate Permanent Subcommittee on Investigations, which I lead, this year exposed how multinational corporations have taken advantage of loopholes in tax law and weaknesses in enforcement to shift their profits overseas to avoid paying taxes.

The first step in shifting profits offshore is when a U.S. company sells or licenses a valuable asset, such as software developed in the United States, to a subsidiary in a low-tax jurisdiction for a price below fair market value.

Profits from the software's sale are shifted to that tax haven.

We showed how Microsoft used this process, called "transfer pricing," to shift $8 billion in income from products developed in the United States to subsidiaries based in Singapore and Ireland to dodge taxes.

We also showed how, through complex transactions, Microsoft was able to use a subsidiary in Puerto Rico to shift nearly half the profits from Microsoft products sold in the United States to Puerto Rico, avoiding a stunning $4 million a day in U.S. taxes.

The second step involves games played with profits shifted from one offshore entity to another.

Under our tax law, companies with income offshore normally don't have to pay U.S. taxes until they bring that money home to the United States.

If the income consists of royalties, licensing fees or other funds that don't require the active involvement of the business, that "passive" income is supposed to be taxed, even when it's offshore.

Our hearing showed how some companies use an IRS regulation, which changed a provision in the tax code, to dodge those taxes.

Literally, they're able to check a box on an IRS form and make offshore subsidiaries, and their taxable income, invisible for tax purposes.

From 2009 to 2011, Apple has been able to defer taxes on more than $35.4 billion using this loophole.

Google has deferred more than $24.2 billion in the same period.

For Microsoft, the number is $21 billion.

Yet many multinationals have at the same time launched a massive lobbying effort, promising to bring billions of offshore dollars back to the United States if they get a "repatriation tax holiday," a large tax break for returning offshore funds to the United States.

These companies assert they intend to indefinitely or permanently invest this money offshore while planning to bring it home as soon as Congress grants them a tax holiday.

That's not any definition of "permanent" that I understand.

We simply can't afford these corporations' offshore tax dodges.

Carl Levin is the senior U.S. senator from Michigan and chairman of the Senate Armed Services Committee. Write him at Russell Senate Office Building Room SR-269, Washington, D.C. 20510; call him at (202) 224-6221; or e-mail him at http://levin.senate.gov/contact/.

 

Happy Thanksgiving

Sorry I’ve not been blogging much recently.  Many other pressing things have come up.  So to give you a worthy blog to read over the holidays, below is one by my friend Nicole Tichon, executive director of the Tax Justice Network USA.   This blog ran recently in The Huffington Post.  Enjoy.

Happy Thanksgiving!

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The Huffington Post
November 20, 2012

Free Enterprise is Not Free
By Nicole Tichon

There's been a lot of talk about what we can't afford as a nation and who is getting what "gift" or which free ride. When President Obama recently met with CEOs and chatted with Jamie Dimon over the weekend, we should hope he issued a stern warning that the tax avoidance games (legally) played by big banks and multinational corporations are on the chopping block. When it comes to cutting, eliminating and restructuring things, these loopholes should be top-of-mind for all leaders.

For all the talk of the importance of giving corporations "certainty" to make sure they can remain "competitive," we aren't hearing a whole lot about what's being asked of them. After all, free enterprise is not free.

In the coming days, weeks and months there will be many pivotal conversations about how and where to tax corporations and how to reform our corporate tax system. Don't believe the hype that these issues are too complicated. They're not. If you paid more than 1.9 percent in income tax, you paid a higher rate than Apple. Period.

Collecting taxes on profits shifted offshore by corporations that benefit from government tax credits, tax loopholes, huge government contracts and, yes, doing business here should be like collecting low-hanging fruit. Both political parties need to work together to combat the damaging effects of the offshoring of jobs and revenues. Our current system drains our treasury. It threatens basic services and national security.

Citizens get it. According to a new poll by Hart Research on behalf of Americans for Tax Fairness, "84 percent of voters approve of increasing taxes on the profits American corporations make

These issues were put on the national stage because of a presidential candidate who uses offshore accounts, and by the reporting of tax shell games by Apple, Google, Starbucks, Microsoft and General Electric. In the U.S., Microsoft and Hewlett-Packard have been investigated, with troubling results. A Senate investigation found that from 2009 to 2011, "Microsoft shifted $21 billion offshore, almost half its U.S. retail sales revenue, saving up to $4.5 billion in taxes on goods sold in the United States." Now, in the U.K., Amazon, Starbucks and Google are being questioned by the government for shady tax practices.

The Obama administration and Congress need to correct a flawed system that has fostered legal tax avoidance and thus raised the ire of progressives, such as Sen. Carl Levin (D-Mich.), and conservatives, such as Senator Tom Coburn (R-Okla), alike.

Who can defend companies making record profits skipping out on their tax bills? Who can honestly keep holding up the disingenuous argument that multinational corporations in the U.S. pay the highest rate in the world when the fact is that it just ain't so?

Consider: According to the Congressional Budget Office, the average tax rate that corporations pay on domestic profits in the U.S. is about 12 percent. In fact, the current system is basically a yearly backdoor bailout: "a system that barely taxes them as it is."

Moving forward, we'll hear lofty-sounding ideas about "broadening the base, lowering the rates, closing loopholes," and more technical ideas about moving to a "territorial system" of taxation.

Let's start with the former: The loopholes that need to be closed are those that enable the largest corporations to pay extraordinarily low tax rates or no tax at all by shifting profits, patents and headquarters offshore. These cost us $100 billion per year. Let's talk about the multinational corporate tax base and those low or non-existent rates. If you're thinking that a corporation can't get lower than a 0-percent tax rate, think again.

With respect to the latter, lawmakers are in danger of making a bad situation worse. A "territorial system" would be tantamount to a permanent tax holiday for corporations. Under this system, companies would not have to pay U.S. federal income taxes on foreign earnings when they bring the profits back to the United States. These "foreign" earnings include the money that companies such as Google pay themselves for their own products or patents conveniently parked offshore. The sieve that is our system of taxing multinational corporations would become a gaping gulf into which even more revenues and jobs will fall.

Powerful special interests and CEOs have already lined up their money, their lobbyists and their media machine to try to lull lawmakers and citizens into believing that they're the grownups at the table and know what's best for you. They don't. Instead, they benefit from a system rigged for their interests. And now they want more, at your expense. According to the Institute for Policy Studies, 63 "Fix the Debt" companies that are publicly held stand to gain as much as $134 billion in windfalls if Congress approves one of their main proposals: a territorial tax system.

This is a critical time, and decisions made about taxation will have long-term and profound effects. It's not fair to continue to ask taxpayers and those who have paid into the system to sacrifice, while failing to collect existing tax revenue from corporations making record profits.

Free enterprise is not free. The nation's budget situation may be reason enough for some to close these loopholes, but the ramifications go much further. American corporations that benefit from the workforce, infrastructure, courts, markets and national security of the United States of America should not be allowed to avoid their responsibilities. In other words, passable roads, clean water, research grants and our national defense are not free.

Former U.S.-based corporations that have benefited from U.S. government research and development dollars and do the majority of their business in the U.S. should not be allowed to simply call a post office box in the Cayman Islands or an empty law office in Switzerland their "headquarters" to pass their tax burden to all other taxpayers.

Waxing on about loopholes without actually showing any real plan to close the most egregious kind is not leadership. False bravado about tough choices and hand-wringing about sacrifice regarding the debt by those who are driving the debt is patently ridiculous.

There's real money in cracking down on offshore tax dodging. Congress needs to close these loopholes and make large corporations pay taxes in the same country that provides them with the benefits and legal protections that make it so profitable to operate in the United States in the first place.

Follow Nicole Tichon on Twitter: www.twitter.com/TaxJusticeUSA

http://www.huffingtonpost.com/nicole-tichon/free-enterprise-is-not-free_b_2160577.html

Small business consistently best at producing new jobs and paying fair share of taxes

The new September ADP National Employment Report is out today saying that 162,000 new private-sector jobs were created in the U.S. last month.  And once again small businesses with less than 50 workers created the most new jobs—81,000. 

Since the beginning of this year new jobs from small businesses have accounted for around 50% of all new employment.  The high was 56% in January and the low being 44.8% in July.  The average for the year is 49.95%.  So the 50% new jobs figure for small business in September was right on the mark.

On another issue, small businesses are making their voices heard on the issue of big corporations and the wealthy using offshore tax havens to avoid paying U.S. taxes.  This means that the rest of us, including every real small business in this country, are subsidizing the government services (courts, defense, infrastructure, first responders, etc.) that the multinational corporations and the millionaire/billionaire crowd are using but don’t want to pay for. 

These “moochers” also are depriving the federal government of resources we need to invest in growing our economy as discussed in the story below.

CNN Money
October 3, 2012

Big firms that avoid taxes are moochers, small companies say

By Jose Pagliery@CNNMoney

NEW YORK (CNNMoney) -- When big companies offshore profits to dodge taxes, small business owners say they are left footing the bill -- and they're not happy about it.

A U.S. Senate panel recently reviewed how Microsoft and Hewlett-Packard shaved billions off their taxes in recent years by moving profits offshore.

Microsoft (MSFT, Fortune 500) avoided paying nearly $7 billion by transferring almost half of its U.S. revenue to a subsidiary in Puerto Rico and moving patents to foreign subsidiaries.

Hewlett-Packard (HPQ, Fortune 500) also dodged taxes -- although the report didn't indicate how much -- by creating subsidiaries abroad and making loans to itself.

Small business owners say they can't offshore profits and take advantage of these opportunities. The strategies require a worldwide presence and are either too complex or too costly.

But those business owners say that's not the only issue. They're bothered by the effect of depleting the government's revenue stream, which creates pressure to cut government spending that the nation's 27 million businesses rely on.

"This tax money goes to support the infrastructure that allows our businesses to be successful," said Joseph Rotella, owner of Spencer Organ, an instrument repair company in Waltham, Massachusetts.

In 2010, Spencer Organ paid $47,000 in taxes while Microsoft gave $4.4 billion. Still, they paid nearly the same effective federal tax rate of 25%.

"These big companies avoid paying their fair share," Rotella said, noting that highly profitable firms rarely pay the actual top federal rate of 35%.

U.S. powerhouses are defending their offshoring of profits by claiming the U.S. corporate tax rate is too high. Currently, a corporation is taxed abroad at the foreign country's rate, and if the United States tax rate is higher, profits heading back to the United States are taxed the difference.

To hotel owner Sue Edgington, whose Adventure Inn is located deep in the woods of northeast Minnesota, the issue of paying taxes is one of patriotism. Like most small business owners, she's fiscally conservative and doesn't gladly fork over more in taxes. However, she said that when companies avoiding paying them, it threatens funding to public colleges like the one she attended -- and protection of wildlife like the kind that draws tourists her way.

"It angers me," she said. "It's morally wrong. That money is being pulled out of our economy. There's a moral obligation to keep it here, because they live in this country and have been able to take advantage of that."

Her frustration could be directed at several of the nation's top companies. Recent financial data reviewed by the Senate panel showed how tech companies Apple (AAPL, Fortune 500), Cisco (CSCO, Fortune 500) and Dell (DELL, Fortune 500), as well as others like American staples Johnson & Johnson (JNJ, Fortune 500), Coca-Cola (CCE, Fortune 500) and Wal-Mart (WMT, Fortune 500) all keep anywhere from 67% to 100% of their cash as "foreign cash."

One small business group, the American Sustainable Business Council, is pushing for the passage of the Stop Tax Haven Abuse Act. The bill seeks to restrict the corporate use of havens like Bermuda and the Cayman Islands. The legislation has a long road ahead, though, as it has died in Congress several times in recent years.

Scott Klinger, tax policy director for the group's partner, Business for Shared Prosperity, said the bill would help the United States raise $1 trillion over a decade.

"When multinationals use accounting acrobatics, they not only shift the tax burden to small businesses. They also create pressure to cut spending on community development and education spending. If those workers lose their jobs to budget cuts, then Main Street loses its customers," Klinger said.

http://money.cnn.com/2012/10/03/smallbusiness/tax-avoidance/

 

 

Big business is doing fine

“Big business is doing fine in many places – they get the loans they need, they can deal with all the regulation. They know how to find ways to get through the tax code, save money by putting various things in the places where there are low tax havens around the world for their businesses.”

Those are the words of GOP Presidential candidate Mitt Romney spoken in Minnesota yesterday.

If big business is doing fine, why aren’t they hiring?  Why are small businesses with fewer than 50 employees accounting for about 50% of all new hires every month this year while businesses with over 500 workers accounting for less than 10% of the new workers. 

We have been continuously told that regulations were stopping big business from hiring.  Now Romney says that is not the case because “they can deal with all the regulation.” 

We also know from survey after survey that small businesses don’t think regulations are a big problem and obviously they aren’t because small businesses are leading in job creation.  So Romney’s comment that small businesses are being “crushed” by regulations is simply not factual.

What is holding back small business growth besides the number one problem of lack of consumer demand is lack of financing.  Ever since the economy crashed due to the reckless gambling of Wall Street, financial institutions have severely restricted loans and lines of credit to small businesses making it extremely difficult for these businesses to grow even as consumer demand is picking up.

But not so for big businesses.  Romney admits that they have no problem in getting loans.

So what is holding big business back from investing in American jobs?

Romney makes that very clear—GREED. These multinational corporations and big business giants simply are hording their profits in “low tax havens around the world”, tax avoidance tactics that are available only to big corporations and wealthy individuals.

And Romney knows what he is talking about because his old company Bain Capital is deep into hiding money offshore.  Today’s news reveals a new tax gimmick involving offshore tax havens used by Romney’s investments in Bain Capital and others to hide even more money from being taxed appropriately—blockers.   

My friend Rebecca Wilkins, senior counsel with Citizens for Tax Justice, told ABC news what a blocker is.  “The blocker is a paper company that serves as a buffer between the investor and the fund holding the investments, Wilkins explained.  That means the investment income can be counted as a dividend and in some cases avoid income tax.”

"It just confirms what everyone already believes about the tax system -- that it's rigged. That the rules are rigged to favor the well off,” said Wilkins.

Every tax dollar big business and the wealthy hide from U.S. taxes so they don’t have to pay for government services that they enjoy (military defense, roads & bridges, education, the courts, etc.) is an extra tax dollar small businesses and the average American has to pay to subsidize the tax evaders.

We’re all paying big business’s fair share of taxes.  No wonder they are doing fine.