Offshore Shell Games (USPIRG): How U.S. Companies Use Loopholes to Avoid Paying Taxes

8/22/2019 Offshore Shell Games (USPIRG): How U.S. Companies Use Loopholes to Avoid Paying Taxes

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Offshore Shell GamesThe Use o Oshore Tax Havens by theTop 100 Publicly Traded Companies


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Oshore Shell Games

The Use o Oshore Tax Havens by theTop 100 Publicly Traded Companies

Dan Smith

July 2013


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Acknowledgments

The author thanks Corey Teeter or his extensive research assistance compiling inormation romcorporate 10-K lings. The author also thanks Steve Wamho o Citizens or Tax Justice, ScottKlinger o Business or Shared Prosperity and the American Sustainable Business Counsel, andPhineas Baxandall and Michael Russo o U.S. PIRG or their thoughtul and inormed comments.The author thanks Richard Phillips o Citizens or Tax Justice or his assistance interpreting in-ormation in 10-K lings as well.

In addition, the author thanks Gabriela Caglieris or proong data rom corporate 10-K lingsand James Dubick or his editorial assistance.

The author bears responsibility or any actual errors. The recommendations are those o the U.S.Public Interest Research Group. The views expressed in this report are those o the author and donot necessarily refect the views o our unders or those who provided review.

Copyright 2013 U.S. PIRG

U.S. PIRG, the ederation o state Public Interest Research Groups (PIRGs), stands up to pow-

erul special interests on behal o the American public, working to win concrete results or ourhealth and our well-being. With a strong network o researchers, advocates, organizers and stu-dents in state capitals across the country, we take on the special interests on issues such as productsaety, public health, political corruption, tax and budget reorm and consumer protection, wherethese interests stand in the way o reorm and progress. Visit us online at www.uspirg.org.

Cover illustration: Alec Meltzer

Design and layout: Alec Meltzer


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Table o Contents

Executive Summary ..................................................................................................... 1

Introduction ................................................................................................................ 4

Tax Haven Subsidiaries are Ubiquitous

Among Americas Largest Corporations ........................................................................ 6

The Oshore Cash Hoard o U.S. Multinational

Corporations Has Grown in Recent Years ..................................................................... 8

Evidence That Much o the Profts

Parked Oshore are in Tax Havens ............................................................................... 9

Firms Reporting Fewer Tax Haven Subsidiaries

Do Not Necessarily Dodge Fewer Taxes Oshore ........................................................ 11

Measures to Stop Abuse o Oshore Tax Havens ........................................................12

Methodology............................................................................................................. 14

Appendix: The Top 100 Publicly Traded Companies ..................................................... 15

Endnotes ................................................................................................................... 28


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Oshore Shell Games 1

Executive Summary

Many large U.S.-based multinational corpo-rations avoid paying U.S. taxes by using ac-counting tricks to make prots made in Amer-ica appear to be generated in oshore taxhavenscountries with minimal or no taxes.By booking prots to subsidiaries registeredin tax havens, multinational corporations areable to avoid an estimated $90 billion in ed-

eral income taxes each year. These subsidiar-ies are oten shell companies with ew, i anyemployees, and which engage in little to noreal business activity.

Loopholes in the tax code make it legal to bookprots oshore, but tax haven abusers orceother Americans to shoulder their tax burden.Every dollar in taxes that corporations avoidby using tax havens must be balanced by otherAmericans paying higher taxes, coping with

cuts to government programs, or increasingthe ederal debt.

This study reveals that tax haven use isubiquitous among the largest 100 publiclytraded companies as measured by revenue.

82 o the top 100 publicly traded U.S. com-panies operate subsidiaries in tax haven ju-risdictions, as o 2012.

All told, these 82 companies maintain2,686 tax haven subsidiaries.

The 15 companies with the most moneyheld oshore collectively operate 1,897 taxhaven subsidiaries.

The 15 companies with the most moneyoshore hold a combined $776 billionoverseas. That is 66 percent o the approxi-mately $1.17 trillion that the top 100 com-panies keep oshore. This list includes:

Apple: A recent Senate investigation oundthat Apple pays next to nothing in taxes on

the $102 billion it books oshore, which isthe second highest amount o any company.Manipulating tax loopholes in the U.S. andother countries, Apple has structured threeIrish subsidiaries to be tax residents o nei-ther the U.S.where they are managed andcontrollednor Irelandwhere they areincorporated. This arrangement ensuresthat they pay no taxes to any governmenton the lions share o their oshore prots.Two o the subsidiaries have no employees.

American Express: The company re-ports having $8.5 billion sitting oshore,on which it would owe $2.6 billion in U.S.taxes i those unds were repatriated. Thatmeans that they currently pay only a 4.4percent tax rate on their oshore prots toforeign governments, suggesting that mosto the money is parked in tax havens levy-ing little to no tax. American express main-tains 22 subsidiaries in oshore tax havens.

Oracle: The tech giant reports having$20.9 billion booked oshore. The com-pany discloses that it would owe $7.3 billionin U.S. taxes on those prots i they werenot oshore. That means they pay a tax rateo less than one percent to oreign govern-ments, suggesting that most o the money


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2 Oshore Shell Games

is booked to tax havens. Oracle maintains 5subsidiaries in oshore tax havens.

Only 21 o the top 100 publicly traded com-panies disclose what they would expect topay in taxes i they didnt keep profts o-shore. All told, these companies would col-lectively owe over $93 billion in additionalederal taxes. To put this enormous sum incontext, it represents close to the entire statebudget o Caliornia and more than the ederalgovernment spends on education.

The average tax rate these companies

currently pay to other countries on thisincome is just 6.9 percent- ar lower thanthe 35 percent statutory U.S. corporate taxratesuggesting that a large portion o thisoshore money is booked to tax havens.

Some companies that report a signifcantamount o money oshore maintain hun-dreds o subsidiaries in tax havens. The topthree companies with the greatest numbero tax haven subsidiaries:

Bank o America reports having 316 sub-sidiaries in oshore tax havens. Kept afoatby taxpayers during the 2008 nancialmeltdown, the bank keeps $17.2 billionoshore, on which it would otherwise owe$4.5 billion in U.S. taxes.

Morgan Stanleymaintains 299 subsidiar-ies in oshore tax havens. The bank, whichalso received a taxpayer bailout in 2008,

reports holding more than $7 billion o-shore, on which it would otherwise owe$1.7 billion in taxes.

Pfzer, the worlds largest drug maker, op-erates 174 subsidiaries in tax havens and

currently books $73 billion in prots o-shore. The company made more than 40percent o its sales in the U.S. between

2010 and 2012, but managed to report noederal taxable income in the U.S. or thepast ve years. This is because Pzer usesaccounting gimmicks to shit the locationo its taxable prots oshore.

Corporations that disclose ewer tax havensubsidiaries do not necessarily dodge ew-er taxes. Since 2008the last time a studyo this scope was donemany companieshave disclosed ewer tax haven subsidiar-

ies, all the while increasing the amount ocash they keep oshore. For some compa-nies, their actual number o tax haven subsid-iaries may be substantially greater than whatthey disclose in the ocial documents used orthis study. For others, it suggests that they arebooking larger amounts o income to ewer taxhaven subsidiaries.

Consider:

Citigroup reported operating 427 tax ha-ven subsidiaries in 2008 but disclosed only20 in 2012. Over that time period, Citi-group increased the amount o cash it re-ported holding oshore rom $21.1 billionto $42.6 billion, ranking the company 9thor the amount o oshore cash.

Google reported operating 25 subsidiariesin tax havens in 2009, but since 2010 onlydiscloses two, both in Ireland. During that

period, it increased the amount o cash ithad reported oshore rom $7.7 billion to$33.3 billion. An academic analysis oundthat as o 2012, the 23 no-longer-disclosedtax haven subsidiaries were still operating.


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Microsot, which reported operating 10subsidiaries in tax havens in 2007, disclosedonly ve in 2012. During this same time

period, the company increased the amounto money it reported holding oshore rom$6.1 billion to $60.8 billion in. This sumrepresents 70 percent o the companyscash, on which it would owe $19.4 billionin U.S. taxes i the income wasnt shitedoverseas. Microsot ranks 4th among all top100 companies or the amount o cash itkeeps oshore.

Strong action to prevent corporations rom

using oshore tax havens will not onlyrestore basic airness to the tax system,but will also help alleviate Americas fs-cal crunch and improve the unctioning omarkets.

Lawmakers can crack down on tax haven abuseby ending incentives or companies to shitprots oshore, closing the most egregiousoshore loopholes, strengthening tax enorce-ment and increasing transparency.


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Introduction

Ugland House is a modest ve-story ocebuilding in the Cayman Islands, yet it is theregistered address or 18,857 companies.1 TheCayman Islands, like many other oshore taxhavens, levies no income taxes on companiesincorporated there. Simply by registering sub-sidiaries in the Cayman Islands, U.S. com-panies can use legal accounting gimmicks to

make much o their U.S.-earned prots appearto be earned in the Caymans and payno taxeson them.

The vast majority o subsidiaries registeredat Ugland House have no physical presencein the Caymans other than a post oce box.About hal o these companies have their bill-ing address in the U.S.2 This unabashedly alsecorporate presence is one o the hallmarks oa tax haven subsidiary.

What is a Tax Haven?Tax havens are jurisdictions with very low ornonexistent taxes. This makes them attrac-tive to U.S.-based multinational rms, whichtranser their reported earnings there to avoidpaying taxes in the United States. These com-panies then use a variety o strategies to bringthe money back to the United States nearly

tax-ree.3 Wealthy individuals also use tax ha-vens to avoid paying taxes by setting up o-shore shell corporations or trusts. Many taxhaven countries are small island nations, such

as Bermuda, the British Virgin Islands, and theCayman Islands.4 Most tax haven countries alsohave nancial secrecy laws that thwart interna-tional rules by limiting disclosure about nan-cial transactions made in their jurisdiction.

This study uses a list o 50 tax haven jurisdic-tions, which each appear on at least one list

o tax havens compiled by the Organizationor Economic Cooperation and Development(OECD), the National Bureau o EconomicResearch, and as part o a U.S. District Courtorder listing tax havens. These lists were alsoused in a 2008 GAO report investigating taxhaven subsidiaries.5

In 2008, all American multinational companiescollectively reported 43 percent o their oreignearnings in ve small tax havens countries: Ber-

muda, Ireland, Luxembourg, the Netherlands,and Switzerland. Yet these countries accountedor only 4 percent o the companies oreignworkorce and just 7 percent o their oreigninvestment. By contrast, American multina-tionals reported earning just 14 percent o theirprots in major U.S. trading partnersAustra-lia, Canada, the UK, Germany, and Mexicowhich accounted or 40 percent o their oreignworkorce and 34 percent o their oreign in-vestment. That same year, the amount o prot

U.S. multinational corporations reported inBermuda and Luxembourgtwo tax havensequaled 1,000 percent and 208 percent o thosecountries entire economic output, respectively.6


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The U.S. Corporate Tax CodeEncourages Companies

to Use Tax HavensCompanies can avoid paying taxes by bookingprots to a tax haven because U.S. tax laws al-low them to deer paying U.S. taxes on protsthey report are earned abroad until they repa-triate the money to the United States by pay-ing dividends to shareholders or repurchasingstock. Corporations receive a dollar-or-dollartax credit or the taxes they pay to oreign gov-ernments in order to avoid double taxation.

Many U.S. companies game this system, rstby using loopholes that let them disguise pro-its legitimately made in the U.S. as oreignprots earned by a subsidiary in a tax haven,and second by claiming that those prots re-main oshoreindenitely deerring paymento taxes on that income.

Many o the prots kept oshore are actuallyhoused in U.S. banks or invested in Americanassets, but registered in the name o oreign

subsidiaries. A Senate investigation o 27 largemultinationals with substantial amounts ocash supposedly trapped oshore ound thatmore than hal o the oshore unds were in-vested in U.S. banks, bonds, and other assets.7For some companies the percentage is muchhigher. A Wall Street Journal investigationound that 93 percent o the money Microsothas oshore was invested in U.S. assets.8 Whilecompanies are barred rom paying dividends toshareholders or repurchasing stock with mon-

ey they declare to be permanently investedoshore, they can benet rom the stability othe U.S. nancial system without paying taxeson that money.

Average TaxpayersPick Up the Tab or

Oshore Tax DodgingEven though loopholes in the tax code makeit legal to shit prots oshore, when corpora-tions abuse tax havens they orce other Ameri-cans to shoulder their tax burden. The prac-tice o shiting corporate income to tax havensubsidiaries cost the Treasury an estimated $90billion annually.9 Every dollar in taxes com-panies avoid by using tax havens must be bal-anced by other Americans paying higher taxes,

coping with cuts to government programs, orincreasing the ederal debt. I small businessowners were to pick up the ull tab or oshoretax avoidance by multinationals, they wouldeach have had to pay an estimated $3,067 inadditional taxes last year.10

It makes sense or prots earned in America tobe subject to U.S. taxation. The prots earnedby these companies generally depend on accessto Americas largest-in-the-world consumer

market11, a well-educated workorce trained byour school systems, our strong private prop-erty rights enorced by Americas court system,and American roads and rail to bring productsto market. Multinational companies that de-pend on Americas economic and social inra-structure are shirking their duty to pay or thatinrastructure i they shelter the resultingprots overseas.


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Tax Haven Subsidiaries are Ubiquitous

Among Americas Largest Corporations

This study ound that 82 o the largest 100largest publicly traded companies, as measuredby revenue, maintain subsidiaries in oshoretax havens, indicating how pervasive tax havenuse is among large companies. All told, these82 companies maintain 2,686 tax haven subsid-

iaries.12

The top 15 companies with the mostmoney held oshore collectively operate 859tax haven subsidiariesalmost a third o thetotal. Bank o America, Citigroup, JPMorgan-Chase, AIG, Goldman Sachs, Wells Fargo andMorgan Stanleyall large nancial institu-tions that received taxpayer bailouts in 2008have a combined 846 subsidiaries in tax havens.

The top three companies with the greatestnumber o tax haven subsidiaries:

Bank o America reports having 316 sub-sidiaries in oshore tax havens. Kept afoatby taxpayers during the 2008 nancialmeltdown, the bank reports holding $17.2billion oshore, on which it would owe$4.5 billion in U.S. taxes i it did not con-tinue to deer their payment.13

Morgan Stanleymaintains 299 subsidiar-ies in oshore tax havens. The bank, whichalso received a taxpayer bailout in 2008,books more than $7 billion oshore, onwhich it would owe $1.7 billion in taxes i itdid not continue to deer their payment.14

Pfzer, the worlds largest drug maker,operates 174 subsidiaries in tax havensand currently keeps $73 billion in pro-its parked oshore.15 The company mademore than 40 percent o its sales in theU.S. between 2010 and 2012,16 but man-aged to report no ederal taxable incomein the U.S. or the past ve years. This isbecause Pzer uses accounting techniquesto shit the location o its taxable prots

oshore. For example, the company canlicense patents or its drugs to a subsidiaryin a low or no-tax country. Then when theU.S. branch o Pzer sells the drug in theU.S., it must pay its own oshore subsid-iary high licensing ees that turn domesticprots into on-the-books losses and shitsprot overseas. Pzer has the third highestamount o money sitting oshore amongU.S. multinational corporations.17


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Table 1: Top 15 Companies with the Most Tax Haven Subsidiaries

CompanyNumber ofTax Haven

SubsidiariesLocations of Subsidiaries

Bank o America 316 Cayman Islands, Luxembourg, Singapore, Netherlands, Costa Rica,Mauritius, Ireland, Gibraltar, Bahamas, Switzerland, Hong Kong, Bermuda,Curacao, Jersey, Lebanon, Monaco, British Virgin Islands, Guernsey, Turks &Caicos Islands

Morgan Stanley 299 Bermuda, Cayman Islands, Cyprus, Gibraltar, Hong Kong, Ireland, Isle o Man,Jersey, Luxembourg, Malta, Mauritius, Netherlands, Singapore, Switzerland

Pfzer 174 Barbados, Bermuda, British Virgin Islands, Cayman Islands, Costa Rica,Hong Kong, Ireland, Jersey, Luxembourg, Netherlands, Panama, Singapore,Switzerland

PepsiCo 160 Barbados, Bahamas, Bermuda, British Virgin Islands, Cayman Islands, CostaRica, Curacao, Cyprus, Gibraltar, Hong Kong, Ireland, Latvia, Liechtenstein,Luxembourg, Mauritius, Netherlands, Singapore, Switzerland

Merck 151 Bermuda, Cayman Islands, Costa Rica, Cyprus, Hong Kong, Ireland, Latvia,Lebanon, Luxembourg, Netherlands, Panama, Singapore, Switzerland

News Corp. 134 Bermuda, British Virgin Islands, Cayman Islands, Gibraltar, Hong Kong,Ireland, Luxembourg, Mauritius, Netherlands, Singapore, Switzerland

Abbott Laboratories 107 Bahamas, Barbados, Bermuda, Cayman Islands, Costa Rica, Cyprus,Gibraltar, Hong Kong, Ireland, Latvia, Lebanon, Luxembourg, Malta,Netherlands, Panama Singapore, Switzerland, Virgin Islands

JPMorgan Chase 91 Cayman Islands, Luxembourg, Ireland, Bahamas, Mauritius, Switzerland,Netherlands, Singapore, Hong Kong, British Virgin Islands, Barbados, Cyprus,

Bermuda Jersey

Dow Chemical 89 Bahrain, Bermuda, Virgin Islands, Costa Rica, Hong Kong, Ireland,Luxembourg, Mauritius, Netherlands, Panama (1), Singapore, Switzerland

Dell 78 Bahrain, Barbados, Bermuda, British Virgin Islands, Cayman Islands,Costa Rica, Hong Kong, Ireland, Jersey, Lebanon, Luxembourg, Mauritius,Netherlands, Panama, Singapore, Switzerland

Caterpillar 76 Bermuda, Cayman Islands, Costa Rica, Hong Kong, Ireland, Jersey,Luxembourg, Netherlands, Panama, Singapore, Switzerland

Wells Fargo 77 Aruba, Barbados, Bahamas, Bermuda, Cayman Islands, Costa Rica, HongKong, Ireland, Jersey, Luxembourg, Mauritius, British Virgin Islands,Netherlands, Singapore, Turks & Caicos

Johnson & Johnson 55 Ireland, Hong Kong, Luxembourg, Netherlands, Singapore, Switzerland

Cisco Systems 47 Bahrain, Bermuda, Costa Rica, Cyprus, Hong Kong, Ireland, Jordan, Latvia,Luxembourg, Mauritius, Netherlands, Panama, Singapore, Switzerland

Procter & Gamble 43 Costa Rica, Hong Kong, Ireland, Luxembourg, Lebanon, Netherlands,Singapore, Switzerland

TOTAL 1897


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The Oshore Cash Hoard o U.S. Multinational

Corporations Has Grown in Recent Years

In recent years, U.S. multinational companieshave increased the amount o money they bookto oreign subsidiaries. A May 2013 study byresearch rm Audit Analytics ound that theRussell 3000 companies collectively reportedhaving $1.9 trillion held oshore. That is an

increase o 70 percent over the last ve years.18

A 2011 study ound that the S&P 500 compa-nies increased the earnings they declared to beoshore by 400 percent.19

For many companies, increasing prots heldoshore does not mean building more acto-ries abroad, selling more products to oreigncustomers or doing any additional real businessactivity in other countries. Instead, many com-panies use accounting tricks to disguise their

prots as oreign, and book them to a subsid-iary in a tax haven to avoid taxes.

The practice o articially shiting protsto tax havens has increased in recent years.In 1999, the prots American multination-als reported earning in Bermuda represented260 percent o the countrys entire economy.By 2008, it was up to 1000 percent. Luxem-bourganother tax havensaw a similar in-crease rom 19 percent in 1999 to 208 percent

in 2008.20

More oshore prot shiting meansmore U.S. taxes avoided by American multi-nationals. A 2007 study by tax expert Kimber-ly Clausing o Reed College estimated thatthe revenue lost to the Treasury due to o-shore tax haven abuse by corporations totaled$60 billion annually. In 2011, she updated herestimate to $90 billion.21

The Top 100 CompaniesReport Holding Nearly$1.2 Trillion OshoreThis report ound that in 2012 the 100 largestpublicly traded companies, as measured by rev-enue, collectively reported holding nearly $1.2trillion oshore that they declare to be per-manently reinvested abroad. That means they

Table 2: Top 15 Companies with the MostMoney Held Oshore

CompanyAmount Held

Offshore(Billions $)

Number ofTax Haven

Subsidiaries

General Electric 108 18

Apple 82.6 3

Pfzer 73 174

Microsot 60.8 5

Merck 53.4 151

Johnson & Johnson 49 55

I.B.M. 44.4 16

Exxon Mobil 43 36

Citigroup 42.6 20

Cisco Systems 41.3 47

Abbott Laboratories 40 107

Procter & Gamble 39 43

Hewlett-Packard 33.4 22

Google 33.3 2

PepsiCo 32.2 160

Total: 776 859


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claim to have no current plans to use the mon-ey to pay dividends to shareholders or makestock repurchases. While nearly 80 percent o

the companies report having income oshore,

some companies shit prots oshore ar moreaggressively than others. The teen compa-nies with the most money oshore account or

$776 billionor 66 percento the total.

Evidence That Much o the ProftsParked Oshore are in Tax Havens

O the 100 companies surveyed by this study,just 21 disclose what theywouldpay in taxes ithey did not keep their prots oshore. Com-panies are required to disclose this inormationin their annual 10-K lings unless the compa-ny determines it is not practicable to do so.22Collectively, these 21 companies alone wouldowe more than $93 billion in additional ederal

taxes. To put this enormous sum in context, itrepresents close to the entire state budget oCaliornia23 and a good deal more than the ed-eral government spends on education.24

More startling is that, as a group, the averagetax rate these 21 companies have paid toforeigngovernments on these prots booked oshore isa mere 6.9 percent. I these companies declaredthat this money was repatriated to the U.S. bypaying dividends or repurchasing stock, they

would pay the 35 percent statutory corporatetax rate, minus what they have already paid tooreign governments. The 6.9 percent rate thesecompanies have paid to oreign governments isar lower than the statutory U.S. corporate taxrate o 35 percent and suggests that the bulk othis cash is sitting in tax havens that levy mini-mal to no corporate tax.

Examples o large companies paying very loworeign tax rates on oshore cash include:

Apple: A recent Senate investigation oundthat Apple pays next to nothing in taxes onthe $102 billion it has booked oshore,which is the second highest oshore cashstockpile. Manipulating tax loopholes in

the U.S. and other countries, Apple struc-tured three Irish subsidiaries to be taxresidents o neither the U.S.where theyare managed and controllednor Ire-landwhere they are incorporated. Thisarrangement ensures that they pay no taxesto any government on the lions share otheir oshore prots. Two o the subsidiar-ies has no employees.25

American Express: The company re-

ports having $8.5 billion sitting oshore,on which it would owe $2.6 billion in U.S.taxes i those unds were repatriated ora 30.6 percent corporate tax rate. Thatmeans they are currently paying a 4.4 per-cent tax rate on their oshore prots tofor-eign governments, suggesting that most othe money is parked in tax havens levying


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little to no tax.26 American Express main-tains 22 subsidiaries in oshore tax havens.

Oracle: The tech giant reports having$20.9 billion booked oshore. The com-pany discloses that it would owe $7.3 billion

in U.S. taxes on those prots i they werenot oshore. That means they pay a tax rateo less than one percent to oreign govern-

ments, suggesting that most o the moneyis booked to tax havens. Oracle maintains 5subsidiaries in oshore tax havens.

Table 3: Tax Rate Paid on Oshore Cash by the 21 Companies that Disclose the Inormation

CompanyAmount Held

Offshore($ millions)

EstimatedDeferred Tax Bill

($ millions)

Tax RatePaid on

Offshore Cash

Number ofTax Haven

Subsidiaries

Microsot 60800 19400 3.09% 5

Apple 82600 26071 3.44% 3

CitiGroup 42600 11500 8.00% 20

Oracle 20900 7300 0.07% 5

Dell 19000 6200 2.37% 77

JPMorgan Chase & Co. 25100 5700 12.29% 91

Bank o America 17200 4300 10.00% 316

Goldman Sachs Group 21690 3750 17.71% 22

American Express 8500 2600 4.41% 22

Hess Corporation 6700 2300 0.67% 8

Morgan Stanley 7191 1700 11.36% 299

Murphy Oil 6020 709 23.22% 21

Ford Motor Co. 6600 600 25.91% 4

Wells Fargo 1300 367 6.77% 77

Amazon 1500 255 18.00% 2

Cardinal Health Group 2200 168 27.36% 11

Walt Disney Company 566 150 8.50% 9Saeway 1300 143 24.04% 8

Lockheed Martin 211 45 13.67% 0

Boeing 263 26 25.11% 1

Express Scripts Holding 66 24 0% 6

Total: 332,307 93,308 Ave: 6.9% 1007


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Firms Reporting Fewer Tax Haven Subsidiaries

Do Not Necessarily Dodge Fewer Taxes Oshore

In 2008, the Government Accountability O-ce conducted a study similar to this one whichrevealed that 83 o the top 100 publicly tradedcompanies operated subsidiaries in oshore taxhavens. Today, some companies report ewersubsidiaries in tax haven countries than they

did in 2008. Meanwhile, some o these samecompanies reported signicant increases inhow much cash they hold abroad, and pay sucha low tax rate to oreign governments that itsuggests the money is booked to tax havens.

One explanation or this phenomenon is thatcompanies are choosing not to report certainsubsidiaries that they once disclosed. The SECrequires that companies report all signi-cant subsidiaries based on multiple measures

o a subsidiarys share o the companys totalassets. Furthermore, i the combined assets oall subsidiaries deemed insignicant collec-tively qualied as a signicant subsidiary, thenthe company would have to disclose them. Buta recent academic study ound that the penal-ties or not disclosing subsidiaries are so lightthat a company might decide that disclosureisnt worth the bad publicity. The researcherspostulate that increased media attention onoshore tax dodging and/or IRS scrutiny could

be a reason why some companies have stoppeddisclosing all subsidiaries. Examining the caseo Google, the academics ound that it wasso improbable that the company could onlyhave two signicant oreign subsidiaries thatGoogle may have calculated that the SECsailure-to-disclose penalties are largely irrel-evant and thereore may have determined that

disclosure was not worth the potential costsassociated with increases in either tax and/ornegative publicity costs.27

The other possibility is that companies aresimply shiting more income to ewer sub-

sidiaries, since having just one tax haven sub-sidiary is enough to dodge billions in taxes.For example, a recent Senate investigation oApple ound that the tech giant primarily usestwo Irish subsidiarieswhich own the rightsto certain intellectual propertyto hold onto $102 billion in oshore cash. Manipulatingtax loopholes in the U.S. and other countries,Apple has structured these subsidiaries so thatthey are not tax residents o either the U.S. orIreland, ensuring that they pay no taxes to any

government on the lions share o the money.One o the subsidiaries has no employees. 28

Examples o large companies that have report-ed ewer tax haven subsidiaries in recent yearswhile simultaneously shiting more prots o-shore include:

Citigroup reported operating 427 tax hav-en subsidiaries in 2008 but reported only20 in 2012. Over that time period, Citi-

group increased how much cash reportedit kept oshore rom $21.1 billion to $42.6billion, ranking the company 9th in theamount o oshore cash.

Google reported operating 25 subsidiariesin tax havens in 2009, but since 2010 onlydiscloses two, both in Ireland. During that


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period, it increased the amount o cash ithad booked oshore rom $7.7 billion to$33.3 billion. An academic analysis ound

that as o 2012, the 23 no-longer-disclosedtax haven subsidiaries were still operating.29

Microsot reported operating 10 sub-sidiaries in tax havens in 2007; in 2012,

it disclosed only ve. During this sametime period, the company increased theamount o money it held oshore rom

$6.1 billion to $60.8 billion in 201270percent o the companys cashon whichit would owe $19.4 billion in U.S. taxes.Microsot ranks 4th or the amount o cashit keeps oshore.

Measures to Stop Abuse o Oshore Tax Havens

Strong action to prevent corporations andwealthy individuals rom using oshore tax ha-vens will not only restore basic airness to thetax system, but will also help alleviate Ameri-cas scal crunch and improve the unctioningo markets.

Lawmakers should reorm the corporate tax codeto end the incentives that encourage companiesto use tax havens, close the most egregious loop-holes, strengthen tax enorcement, and increasetransparency so that companies cant use layers oshell companies to shrink their tax burden.

End incentives to shit

profts and jobs oshore. The most comprehensive solution to end-

ing tax haven abuse would be to no longerpermit U.S. multinational corporations toindenitely deer paying U.S. taxes on theprots they attribute to their oreign enti-ties. Instead, they should pay U.S. taxes onthem immediately. Double taxation is not

an issue because the companies already sub-tract any oreign taxes theyve paid rom theirU.S. tax bill. This simple reorm would raisenearly $600 billion over ten years, accordingto the Joint Committee on Taxation to.30

Reject a territorial tax system. Tax ha-ven abuse would be worse under a systemin which companies could temporarily shitprots to tax haven countries, pay minimaltax under those countries tax laws and thenreely bring the prots back to the UnitedStates without paying any U.S. taxes. TheTreasury Department estimates that switch-ing to a territorial tax system could add $130billion to the decit over ten years.31

Close the most egregiousoshore loopholes. Stop companies rom licensing intellectual

property (e.g. patents, trademarks, licenses)to shell companies in tax haven countries andthen paying infated ees to use them in the


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United States. This common practice allowscompanies to legally book prots that wereearned in the U.S. to the tax haven subsidiary

owning the patent. Proposals made by Presi-dent Obama and included in Senator LevinsCUT Loopholes Act could save taxpayers$20 billion over ten years, according to theJoint Committee on Taxation.32

Treat the prots o publicly traded or-eign corporations that are managed andcontrolled in the United States as domesticcorporations or income tax purposes.

Reorm the so-called check-the-box rulesto stop multinational companies rom ma-nipulating how they dene their corporatestatus to minimize their taxes. Right now,companies can make inconsistent claims tomaximize their tax advantage, telling onecountry they are one type o corporate en-tity while telling another country the sameentity is something else entirely.

Close the current loophole that allows U.S.

companies that shit income to oreignsubsidiaries to place that money in oreignbranches o American nancial institutionswithout it being considered repatriated,and thus taxable. This oreign U.S. in-come should be taxed when the money isdeposited in U.S. nancial institutions.

Stop companies rom taking bigger tax de-ductions than the law intends or the taxesthey pay to oreign countries by simply re-

quiring companies to report ull inorma-tion on oreign tax credits. Proposals topool oreign tax credits would save $57billion over ten years, according to theJoint Committee on Taxation.33

End two expensive and unnecessary tax ex-tenders. In January Congress extended two

costlyand wasteuloshore tax loop-holes as a part o the scal cli deal. Everyyear Congress is asked to extend a rat o un-

related tax provisions known as tax extend-ers. Congress tends to extend virtually all othem each year with little scrutiny becausesome measures enjoy broad support, such asannual adjustment o the Alternative Mini-mum Tax. The next time Congress considersthe tax extenders, it should cut two expensiveprovisions that were temporarily insertedinto the tax code years ago. Each rule makesit easier or multinational companies to stashtheir U.S. earnings oshore and avoid paying

taxes on them. The rst provision, known asthe active nancing exception, adds $11.2billion to the decit over two years. Likewise,the controlled oreign corporation (CFC)look-through rule costs $1.5 billion overtwo years, according to estimates by the Sen-ate Joint Committee on Taxation.34

Stop companies rom deducting interestexpenses paid to their own oshore ali-ates, which put o paying taxes on that in-

come. Right now, an oshore subsidiary oa U.S. company can deer paying taxes oninterest income it collects rom the U.S.-based parent, even while the U.S. parentclaims those interest payments as a tax de-duction. This reorm would save nearly$60 billion over ten years, according to theJoint Committee on Taxation.35

Strengthen tax enorcementand increase transparency. Require ull and honest reporting to expose

tax haven abuse. Multinational corporationsshould report their prots on a country-by-country basis so they cant mislead eachnation about the share o their income thatwas taxed in the other countries.


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Methodology

To calculate the number o tax haven subsidiar-ies maintained by the 100 largest publicly tradedcorporations, we used the same methodology asa 2008 study by the Government AccountabilityOce that used 2007 data (see note 5).

The list o 50 tax havens used is based on listscompiled by three sources using similar char-

acteristics to dene tax havens. These sourceswere the Organization or Economic Co-oper-ation and Development (OECD), the NationalBureau o Economic Research, and a U.S. Dis-trict Court order. This court order gave theIRS the authority to issue a John Doe sum-mons, which included a list o tax havens andnancial privacy jurisdictions.

To determine the 100 largest publicly tradedcompanies by revenue, we used the 2012 For-

tune 500 list. It is available at: http://money.cnn.com/magazines/ortune/ortune500/2012/ull_list/. A ew companies on this list were ex-cluded rom this study because they were notpublicly traded and thereore did not le 10-Kreports with the SEC.

To gure out how many subsidiaries eachcompany had in the 50 known tax havens, welooked at Exhibit 21 o each companys 2012

10-K report, which is led annually with theSecurities and Exchange Commission (SEC).Exhibit 21 lists out every reported subsidiary othe company and the country in which it is reg-istered. We used the SECs EDGAR databaseto nd the 10-K lings.

We also used 10-K reports to nd the amount o

money each company reported it kept oshorein 2012. This inormation is typically ound inthe tax ootnote o the 10-K. The companiesdisclose this inormation as the amount theykeep permanently reinvested abroad.

As explained in this report, 21 o the compa-nies surveyed disclosed what their estimatedtax bill would be i they repatriated the moneythey kept oshore. This inormation is alsoound in the tax ootnote. To calculate the tax

rate these companies paid abroad in 2012, werst divided the estimated tax bill by the totalamount kept oshore. That number multi-plied by 100 equals the U.S. tax rate the com-pany would pay i they repatriated that oreigncash. Since companies receive dollar-or-dollarcredits or taxes paid to oreign governments,the tax rate paid abroad is simply the dierencebetween 35% - the U.S. statutory corporate taxrateand the tax rate paid upon repatriation.


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Appendix:

The Top 100 Publicly Traded Companies

CompanyRank byRevenue

Tax havenSubsidiaries

Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Exxon Mobil 1 36 Bermuda (1)Bahamas (17)

Cayman Islands (1)Hong Kong (3)

Luxembourg (2)Singapore (2)

The Netherlands (5)

43000 Texas

Wal-Mart 2 0 19200 Arkansas

Chevron 3 18 Bermuda (11)Bahamas (5)Singapore (1)

Liberia (1)

26527 Caliornia

Conoco Phillips 4 24 Luxembourg (1)Bermuda (5)

Netherlands (8)Bahamas (1)

Singapore (1)British Virgin Islands (1)

Liberia (2)Cayman Islands (5)

2286 Texas

General Motors 5 15 Bermuda (2)Cayman Islands (2)

Hong Kong (1)Ireland (1)

Singapore (1)Switzerland (3)Netherlands (5)

5500 Michigan

General Electric 6 18 Bermuda (3)Bahamas (1)Ireland (2)

Luxembourg (3)Netherlands (5)Singapore (4)

108000 Connecticut


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Berkshire Hathaway 7 7 Cayman Islands (1)Luxembourg (2)Netherlands (4)

7900 Nebraska

Fannie Mae 8 0 Washington D.C.

Ford Motor Co. 9 4 Mauritius (1)The Netherlands (2)

Switzerland (1)

6600 Michigan

Hewlett-Packard 10 22 Bermuda (1)Cayman Islands (2)

Costa Rica (1)Cyprus (1)


Luxembourg (1)Netherlands (6)Singapore (4)

Switzerland (2)

33400 Caliornia

AT&T 11 0 Texas

Valero Energy 12 15 Aruba (5)British Virgin Islands (3)

Cayman Islands (2)Ireland (2)

Luxembourg (1)Netherlands (2)

3500 Texas

Bank o America 13 316 Cayman Islands (176)Luxembourg (22)Singapore (10)

Netherlands (37)Costa Rica (1)Mauritius (8)Ireland (10)Gibraltar (4)Bahamas (2)

Switzerland (4)Hong Kong (10)

Bermuda (3)Curacao (1)Jersey (17)

Lebanon (1)Monaco (1)

Virgin Islands (4)Guernsey (3)

Turks & Caicos Islands (1)

17200 North Carolina

McKesson 14 1 Ireland (1) 3800 Caliornia


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Verizon 15 0 1800 New York

JPMorgan Chase 16 91 Cayman Islands (20)Luxembourg (8)

Ireland (8)Bahamas (1)

Mauritius (14)Switzerland (3)

The Netherlands (5)Singapore (8)Hong Kong (9)

British Virgin Islands (4)Barbados (1)

Cyprus (1)Bermuda (2)

Jersey (7)

25100 New York

Apple 17 3 Ireland (3) 82600 Caliornia

CVS Caremark 18 0 Rhode Island

I.B.M. 19 16 Bahamas (1)Barbados (1)Bermuda (1)

Costa Rica (1)Hong Kong (1)

Ireland (2)Latvia (1)

Luxembourg (1)Malta (1)

Mauritius (1)Netherlands (2)Seychelles (1)Singapore (1)

Switzerland (1)

44400 New York

CitiGroup 20 20 Bahamas (5)Cayman Islands (1)


Mauritius (1)The Netherlands (2)

Singapore (3)Switzerland (2)

42600 New York


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Cardinal Health Group 21 11 Bermuda (1)British Virgin Islands (1)

Cayman Islands (2)

Hong Kong (1)Ireland (1)The Netherlands (1)

Singapore (1)Malta (1)

Switzerland (1)Luxembourg (1)

2200 Ohio

United Health Group 22 19 Bermuda (1)Cayman Islands (3)

Hong Kong (1)Ireland (2)Jersey (1)

Luxembourg (4)The Netherlands (5)Singapore (2)

94 Minnesota

Kroger 23 1 Hong Kong (1) Ohio

Costco Wholesale 24 0 Washington

Freddie Mac 25 0 New York

Wells Fargo 26 77 Aruba (1)Barbados (1)Bahamas (3)Bermuda (6)

Cayman Islands (27)Costa Rica (1)Hong Kong (7)

Ireland (2)Jersey (1)

Luxembourg (8)Mauritius (8)

British Virgin Islands (1)The Netherlands (6)

Singapore (4)Turks & Caicos (1)

1300 Caliornia

Procter & Gamble 27 43 Costa Rica (2)Hong Kong (2)

Ireland (2)Luxembourg (5)

Lebanon (1)The Netherlands (17)


39000 Ohio


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Archer-Daniels-Midland 28 3 Cayman Islands (1)Netherlands (3)Switzerland (1)

7200 Illinois

AmerisourceBergen 29 0 93 Pennsylvania

INTL FCStone 30 6 British Virgin Islands (1)Ireland (1)

Netherlands (2)Singapore (2)

130.7 New York

Marathon Petroleum 31 2 Bermuda (2) Ohio

Walgreen 32 11 Bermuda (1)Hong Kong (1)



Illinois

AIG 33 21 Bahrain (2)Bermuda (6)Cyprus (1)

Guernsey (1)Hong Kong (2)

Ireland (3)Lebanon (1)

Liechtenstein (1)Singapore (3)

Switzerland (1)

New York

MetLie 34 26 Bermuda (1)British Virgin Islands (1)

Cayman Islands (7)Cyprus (2)



2400 New York

Home Depot 35 0 2700 Georgia

Medco Health Solutions 36 9 Ireland (1)

The Netherlands (7)Switzerland (1)

New Jersey

Microsot 37 5 Ireland (3)Luxembourg (1)Singapore (1)

60800 Washington

Target 38 0 52 Minnesota


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Boeing 39 1 Bermuda (1) 263 Washington

Pfzer 40 174 Barbados (1)Bermuda (5)

British Virgin Islands (1)Cayman Islands (1)



Luxembourg (40)Panama (7)

The Netherlands (54)Singapore (9)

Switzerland (3)

73000 New York

PepsiCo 41 160 Barbados (1)Bahamas (1)Bermuda (18)

British Virgin Islands (2)Cayman Islands (5)

Costa Rica (2)Curacao (10)Cyprus (14)Gibraltar (3)

Hong Kong (9)Ireland (14)Latvia (1)

Liechtenstein (1)

Luxembourg (25)Mauritius (2)Panama (1)


Switzerland (6)

32200 New York

Johnson & Johnson 42 55 Ireland (18)Hong Kong (1)



49000 New Jersey


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Dell 44 78 Bahrain (1)Barbados (1)Bermuda (2)

British Virgin Islands (2)Cayman Islands (4)Costa Rica (2)Hong Kong (6)


Lebanon (1)Luxembourg (3)

Mauritius (2)Panama (1)

The Netherlands (27)Singapore (11)Switzerland (5)

19000 Texas

WellPoint 45 3 Ireland (3) Indiana

Caterpillar 46 76 Bermuda (8)Cayman Islands (1)




Panama (3)Singapore (8)

Switzerland (13)

15000 Illinois

Dow Chemical 47 89 Bahrain (3)Bermuda (7)

Virgin Islands (1)Costa Rica (2)Hong Kong (7)


Mauritius (3)Panama (1)


Switzerland (10)

14504 Texas

United Technologies 48 23 Cayman Islands (1)Hong Kong (2)



Switzerland (3)

22000 Connecticut


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Comcast Corp. 49 20 Hong Kong (2)The Netherlands (8)

Singapore (8)

Switzerland (2)

Pennsylvania

Krat Foods 50 2 The Netherlands (2) 24 Illinois

Intel 51 11 Cayman Islands (6)Costa Rica (1)Hong Kong (1)

The Netherlands (3)

17500 Caliornia

UPS 52 3 Hong Kong (1)British Virgin Islands (1)

Luxembourg (1)

3575 Georgia

BestBuy 53 32 Bermuda (1)



The Netherlands (16)Switzerland (1)

Turks & Caicos (1)

2500 Minnesota

Lowes 54 0 36 North Carolina

Prudential Financial 55 34 Barbados (1)Bermuda (4)

British Virgin islands (1)

Cayman Islands (12)Hong Kong (3)


Luxembourg (7)Singapore (3)

1747 New Jersey

Amazon 56 2 Luxembourg (2) 1500 Washington

Merck 57 151 Bermuda (14)Cayman Islands (1)




Panama (5)The Netherlands (53)


53400 New Jersey


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Lockheed Martin 58 0 211 Maryland

Coca Cola 59 13 British Virgin Islands (1)Cayman Islands (3)

Cook Islands (1)Costa Rica (1)Hong Kong (1)



26900 New York

Express Scripts Holding 60 6 Ireland (1)The Netherlands (4)

Switzerland (1)

65.6 Missouri

Sunoco 61 5 Bermuda (3)The Netherlands (2)

Pennsylvania

Enterprise Products Partners 62 0 Texas

Saeway 63 8 Barbados (1)Bermuda (1)

British Virgin Islands (2)Hong Kong (2)

Macau (1)The Netherlands (1)

1300 Caliornia

Cisco Systems 64 47 Bahrain (1)Bermuda (7)


Hong Kong (6)Ireland (8)Jordan (1)Latvia (1)

Luxembourg (2)Mauritius (2)Panama (1)


Switzerland (2)

41300 Caliornia

Sears Holding Company 65 2 Hong Kong (1)Bermuda (1)

Walt Disney Company 66 9 Bermuda (1)Hong Kong (1)



566 Caliornia


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Johnson Controls 67 0 6400 Wisconsin

Morgan Stanley 68 299 Bermuda (4)Cayman Islands (128)

Cyprus (4)Gibraltar (15)


Isle o Man (1)Jersey (13)

Luxembourg (52)Malta (4)



7191 New York

Sysco Corporation 69 7 Cayman Islands (2)Hong Kong (2)

Ireland (1)The Netherlands (2)

910.6 Caliornia

FedEx 70 0 1000 Tennessee

Abbott Laboratories 71 107 Bahamas (3)Barbados (1)Bermuda (7)

Cayman Islands (4)Costa Rica (2)

Cyprus (2)Gibraltar (6)



Malta (1)Panama (2)


Switzerland (7)Virgin Islands (1)

40000 Illinois

DuPont Chemical 72 17 Bermuda (2)Hong Kong (1)

Luxembourg (5)The Netherlands (4)


13 Delaware

Google 73 2 Ireland (2) 33300 Caliornia


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

Hess Corporation 74 8 Cayman Islands (6)The Netherlands (2)

6700 New York

Supervalu 75 5 Bermuda (4)Cayman Islands (1)

Minnesota

United Continental Holdings 76 1 Bermuda (1) Illinois

Honeywell International 77 5 Luxembourg (1)Singapore (1)

Switzerland (3)

11600 New Jersey

CHS Inc. 78 10 Bermuda (1)Cyprus (2)

Hong Kong (1)The Netherlands (1)

Singapore (2)

Switzerland (3)

Minnesota

Humana 79 1 Cayman Islands (1) Kentucky

Goldman Sachs Group 80 22 British Virgin Islands (1)Cayman Islands (6)


Mauritius (4)

21690 New York

Ingram Micro 81 41 Barbados (1)Bermuda (1)

British Virgin Islands (6)

Cayman Islands (5)Costa Rica (1)Hong Kong (4)Lebanon (1)



Switzerland (2)

2100 Caliornia

Oracle 82 5 Ireland (5) 20900 Caliornia

Delta Airlines 83 2 Bermuda (1)

Ireland (1)

Georgia


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

World Fuel Services 85 29 Bahamas (1)British Virgin Islands (1)

Cayman Islands (4)

Costa Rica (6)Gibraltar (2)Ireland (1)

Luxembourg (2)The Netherlands (9)

Singapore (3)

934.5 Florida

Plains All American Pipeline 87 2 Luxembourg (2) Texas

Aetna 89 10 Bermuda (4)Cayman Islands (1)


Singapore (2)

Connecticut

Sprint Nextel 90 7 Bermuda (1)Hong Kong (1)

Ireland (1)The Netherlands (1)


154 Kansas

News Corp. 91 134 Bermuda (1)British Virgin Islands (26)

Cayman Islands (18)Gibraltar (1)




Switzerland (3)

8400 New York

General Dynamics 92 15 Bermuda (1)Cyprus (1)

Gibraltar (1)Hong Kong (2)

The Netherlands (1)


1600 Virginia

Allstate Corporation 93 0 Illinois

HCA Holdings 94 7 Bermuda (1)Cayman Islands (1)

Luxembourg (2)Switzerland (3)

Tennessee


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Location oTax Haven

Subsidiaries

Amount HeldOshore

($ millions)

StateLocated

American Express 95 22 Bahrain (1)Hong Kong (2)

Jersey (5)

Luxembourg (3)The Netherlands (6)Netherland Antilles (1)


8500 New York

Tyson Foods 96 20 British Virgin Islands (1)Cayman Islands (1)

Hong Kong (10)Luxembourg (4)


230 Arizona

Deere 97 4 Luxembourg (2)Singapore (1)Switzerland (1)

628 Illinois

Murphy Oil 98 21 Bahamas (20)Singapore (1)

6020 Arizona

Philip Morris International 99 7 The Netherlands (3)Switzerland (4)

18000 New York

Tesoro 101 0 30 Texas

3M 102 13 Bermuda (1)Hong Kong (1)

Luxembourg (3)The Netherlands (1 )

Singapore (4 )Switzerland (3)

8600 Minnesota

Time Warner 103 4 The Netherlands (3)Singapore (1)

1900 New York

Northrup Grumman 104 0 2.116 Virginia

DirecTV 105 15 Barbados (1 )British Virgin Islands (1)

Cayman Islands (5)

Costa Rica (1)Mauritius (2)

The Netherlands (4)St. Lucia (1)

11 New York

Total: 2,686 $1.17 Trillion


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Endnotes

1 Government Accountability Oce, Business and Tax Advantages Attract U.S. Persons and Enorcement Challenges Exist,GAO-08-778, a report to the Chairman and Ranking Member, Committee on Finance, U.S. Senate (July 2008), available athttp://www.gao.gov/highlights/d08778high.pd

2 Ibid.

3 Jesse Drucker, Bloomberg News, Avoiding Taxes on Oshore Earnings an Art; Tax Holiday at Issue but Who Needs It?Pittsburgh Post-Gazette, 30 December 2010.

4 Jane G. Gravelle, Congressional Research Service, Tax Havens: International Tax Avoidance and Evasion, 4 June 2010.

5 Government Accountability Oce, International Taxation; Large U.S. Corporations and Federal Contractors with Subsidiaries in

Jurisdictions Listed as Tax Havens or Financial Privacy Jurisdictions, December 2008.

6 Mark P. Keightley, An Analysis o Where American Companies Report Profts: Indications o Proft Shiting, CongressionalResearch Service, January 18, 2013.

7 Oshore Funds Located On Shore, Majority Sta Report Addendum, Senate Permanent Subcommittee on Investigations, 14December 2011. Report can be ound at: http://www.levin.senate.gov/newsroom/press/release/new-data-show-corporate-offshore-funds-not-trapped-abroad-nearly-half-of-so-called-offshore-funds-already-in-the-united-states/

8 Kate Linebaugh, Firms Keep Stockpiles o Foreign Cash in U.S., Wall Street Journal, 22 January 2013, http://online.wsj.com/article/SB10001424127887323301104578255663224471212.html

9 Kimberly A. Clausing, The Revenue Eects o Multinational Firm Income Shiting, Tax Notes, 28 March 2011, 1580-1586

10 Phineas Baxandall and Dan Smith, Picking up the Tab, U.S. PIRG, April 2013. http://www.uspirg.org/reports/usp/picking-tab-2013

11 China to Become Worlds Second Largest Consumer Market, Proactive Investors United Kingdom, January 19, 2011(Discussing a report released by Boston Consulting Group), available at http://www.proactiveinvestors.co.uk/columns/china-weekly-bulletin/4321/china-to-become-worlds-second-largest-consumer-market-4321.html (visited 3/31/12)

12 The number o subsidiaries registered in tax havens is calculated by authors looking at exhibit 21 o the companys 2013 10-Kreport led annually with the Securities and Exchange Commission. The list o tax havens comes rom the GovernmentAccountability Oce report cited in note 5.

13 The amount o money that a company has parked oshore and the taxes the company would owe i they repatriated that incomecan also be ound in the 10-K report; however, not all companies disclose the latter.

14 See note 12.

15 See note 12.

16 Calculated by the authors based on revenue inormation rom Pzers 2012 10-K ling.

17 Scott Thurm and Kate Linebaugh, More U.S. Prots Parked Abroad, Saving on Taxes, Wall Street Journal, 10 March 2013,http://online.wsj.com/article/SB10001424127887324034804578348131432634740.html.

18 Audit Analytics, Foreign Indenitely Reinvested Earnings: Balances Held by the Russell 3000, 1 May 2013.


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19 Zion, Varsheny, and Burnap, Parking Earnings Overseas, Credit Suisse, 26 April 2011, cited by Senate Permanent Subcommitteeon Investigations, Oshore Prot Shiting and the U.S. Tax CodePart 2, 21 May 2013.

20 See note 6.

21 Kimberly A. Clausing, Multinational Firm Tax Avoidance and U.S. Government Revenue, August 2007; See note 9 for more recentstudy.

22 Citizens or Tax Justice, Apple is not Alone 2 June 2013, http://ctj.org/ctjreports/2013/06/apple_is_not_alone.php#.UeXKWm3FmH8.

23 Caliornia passed a $96.3 billion budget or the new scal year. See http://www.sfgate.com/news/article/State-lawmakers-OK-96-3-

billion-budget-4601574.php

24 The U.S. Department o Education budget is $68.4 billion. See U.S. Department o Education, Overview: Budget OceU.S.Department o Education, accessed 5 July 2013, available athttp://www2.ed.gov/about/overview/budget/index.html?src=ct

25 Senate Permanent Subcommittee on Investigations, Oshore Prot Shiting and the U.S. Tax CodePart 2, 21 May 2013,available athttp://www.hsgac.senate.gov/subcommittees/investigations/hearings/offshore-prot-shifting-and-the-us-tax-code_-part-2.

26 Companies get a credit or taxes paid to oreign governments when they repatriate oreign earnings. Thereore, i companiesdisclose what their hypothetical tax bill would be i they repatriated permanently reinvested earnings, it is possible to deducewhat they are currently paying to oreign governments. For example, i a company discloses that they would need to pay the ullstatutory 35% tax rate on its oshore cash, it implies that they are currently paying no taxes to oreign governments, which wouldentitle them to a tax credit that would reduce the 35% rate. This method o calculating oreign tax rates was original used byCitizens or Tax Justice (see note 21).

27 Jerey Gramlich and Janie Whiteaker-Poe, Disappearing subsidiaries: The Cases o Google and Oracle, March 2013, 8.

28 See note 25.

29 See note 27.

30 Fact Sheet on the Sanders/Schakowsky Corporate Tax Fairness Act, February 7, 2012, http://www.sanders.senate.gov/imo/media/doc/CORPTA%20FAIRNESSFACTSHEET.pdf

31 The Presidents Economic Recovery Board, The Report on Tax Reorm Options: Simplication, Compliance, and CorporateTaxation, August 2010, http://www.treasury.gov/resource-center/tax-policy/Documents/PERAB-Tax-Reform-Report-8-2010.pdf.

32 Joint Committee on Taxation, Estimated Budget Eects o the Revenue Provisions Contained in the Presidents Fiscal Year 2013Budget Proposal, March 12, 2012, https://www.jct.gov/publications.html?unc=startdown&id=4413.

33 Joint Committee on Taxation, Estimated Budget Eects o the Revenue Provisions Contained in the Presidents Fiscal Year 2013Budget Proposal, March 12, 2012, https://www.jct.gov/publications.html?unc=startdown&id=4413.

34 Joint Committee on Taxation, Estimated Revenue Eects o the Chairmans Mark As Modied To The Provisions O The FamilyAnd Business Tax Cut Certainty Act O 2012, August 2, 2012https://www.jct.gov/publications.html?unc=startdown&id=4482

35 Joint Committee on Taxation, Estimated Budget Eects o the Revenue Provisions Contained in the Presidents Fiscal Year 2013Budget Proposal, March 12, 2012, https://www.jct.gov/publications.html?func=startdown&id=4413.

Offshore Shell Games (USPIRG): How U.S. Companies Use Loopholes to Avoid Paying Taxes

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