The 50 biggest US companies have more than a trillion dollars hidden offshore according to a new report published by Oxfam today. This is more than the entire GDP of countries such as Spain, Mexico or Australia.
The companies, which include global brands such as Pfizer, Goldman Sachs, Dow Chemical, Chevron, Walmart, IBM, and Procter and Gamble, have more than 1,600 subsidiaries in tax havens.
The Broken at the Top report by Oxfam in the US found that the companies, which together made nearly $4 trillion in profits globally between 2008 and 2014, received a staggering $11 trillion in US government support over the same period. Oxfam calculates that during this period, these companies collectively received approximately $27 in government support for every $1 they paid in federal taxes.
The revelations come in the wake of the Panama Papers scandal that, once again, revealed how powerful individuals and companies are using tax havens to hide their wealth and dodge taxes.
Robbie Silverman, Senior Tax Advisor at Oxfam said: “Yet again we have evidence of a massive systematic abuse of the global tax system. We can’t go on with a situation where the rich and powerful are not paying their fair share of tax, leaving the rest of us to foot the bill. Governments across the globe must come together now to end the era of tax havens.”
Tax avoidance has become standard business practice across the globe. Oxfam estimates that 90 percent of the top 200 global companies use tax havens.
On Tuesday, the European Commission announced plans to make big companies more transparent about where they pay tax. Oxfam believes that the limited scope of these proposals makes them almost useless for identifying where tax avoidance may be happening. It is urging the UK Government to push for stronger rules to ensure multinationals report their taxes and profits in all countries where they do business, including tax havens and developing countries.
Silverman said: “The same tricks and tools used by multinational companies to dodge tax in the US are being used to cheat countries across the world out of their fair share of tax revenues, with devastating consequences. Poor countries are particularly hard hit, losing an estimated $100 billion a year to corporate tax dodgers. This is enough to provide safe water and sanitation to more than 2.2 billion people.”
The 50 companies spent approximately $2.6 billion lobbying the US government to maintain favourable tax rules and other beneficial policies between 2008 and 2014. This lobbying generates an incredible rate of return. Oxfam estimates that for every $1 spent on lobbying, the 50 big US companies collectively received $130 in tax breaks and more than $4000 in subsidies from the US government.
Silverman added: “When corporations don’t pay their fair share of taxes governments are forced to cut back on essential services or levy higher taxes on the rest of us. It’s time governments stopped pandering to big business and started working for the good of their citizens.”
Broken at the Top outlines a range of tricks, tools, and loopholes companies use to avoid paying tax. One of the most common is ‘profit shifting’, where a company declares its profits in a low or zero tax jurisdiction instead of where they actually do business. In 2012 for example, US companies reported $80 billion of profits in the tiny island of Bermuda – a British Overseas Territory – more than their reported profits in Japan, China, Germany and France combined.
Oxfam is calling for governments to work together to ensure multinational companies and wealthy individuals pay their fair share of tax. This must include measures to ensure companies pay taxes where they do business and to stop the secrecy that enables companies and individuals to hide their money from tax authorities.