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Offshore Tax Havens Cost Average Connecticut Taxpayer $1,965 a Year, Connecticut Small Business $5,989
With Tax Day approaching, it’s a good time to be reminded of where our tax dollars are going. ConnPIRG released a new study today which revealed that the average Connecticut taxpayer in 2012 would have to shoulder an extra $1,965 in taxes – more per taxpayer than in any state in the country. - to make up for the revenue lost due to the use of offshore tax havens by corporations and wealthy individuals.
“Tax dodging is not a victimless offense. When companies use accounting gimmicks to move their profits to tax haven shell companies, the rest of us have to pick up the tab,” said Abe Scarr, ConnPIRG Director. “With the nation facing such serious budget challenges, it’s a no-brainer that we need to close these loopholes and stop letting large corporations avoid paying what they should.”
Every year, corporations and wealthy individuals avoid paying an estimated $150 billion in taxes by using complicated accounting tricks to shift their profits to offshore tax havens. Of that $150 billion, $90 billion is avoided specifically by corporations.
The federal revenue lost to offshore tax havens would be more than enough to cover the automatic federal budget cuts caused by the sequester. A recent ConnPIRG report also found that offshore tax dodging costs Connecticut $904 million annually, which would be enough to fund the salaries of 13,000 Connecticut school teachers, or cover more than a quarter of the $3.12 billion Governor Malloy requested from the federal government for Hurricane Sandy infrastructure improvements
The report additionally found that the average Connecticut small business would have to pay $5,989 to cover the cost of offshore tax dodging by large corporations. Offshore tax havens give large multinationals a competitive advantage over responsible small businesses which don’t use tax havens and get stuck footing the bill for corporate tax dodging.
Many of America’s largest and best-known corporations use these complex tax avoidance schemes to shift their profits offshore and drastically shrink their tax bill:
- Pfizer, the world’s largest drug maker, made 40 percent of its sales in the U.S. over the past five years, but thanks to their use of offshore tax loopholes they reported no taxable income in the U.S. during that time. The company operates 172 subsidiaries in tax havens and has $73 billion parked offshore which remains untaxed by the U.S., according to its own SEC filing. That is the second highest amount of money sitting offshore for one U.S. multinational corporation.
- Microsoft avoided $4.5 billion in federal income taxes over a three year period by using sophisticated accounting tricks to artificially shift its income to tax-friendly Puerto Rico. Microsoft maintains five tax haven subsidiaries and keeps 70 percent of its cash offshore, a total of $60.8 billion, on which it would otherwise owe $19.4 billion in U.S. taxes.
- Citigroup – a bank that was bailed out by taxpayers during the financial meltdown of 2008 – maintains 20 subsidiaries in tax havens and has $42.6 billion sitting offshore, on which it would otherwise owe $$11.5 billion in taxes, according to its own SEC filing. Citigroup currently ranks eighth among U.S. multinationals for having the most money stashed offshore.
“It is appalling that these companies get out of paying for the nation’s infrastructure, education system, and security that help make them successful,” added Scarr,
The report recommends closing a number of offshore tax loopholes. Many of these reforms are included in the Cut Unjustified Tax Loopholes Act (Senate Bill 268).
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