Massachusetts Fair Share

We stand up for a Massachusetts where everyone gets a fair shot, does and pays their fair share, and plays by the same rules.

As New Data Sheds Light on Offshore Tax Dodging, State Leaders Have Opportunity to Close Loophole

A new report finds U.S. companies are holding $2 trillion offshore, as Massachusetts lawmakers consider a bill which would close an offshoring loophole and restore $79 million annually to the state budget

As state and federal lawmakers consider corporate tax reform, a new report found Fortune 500 companies have booked nearly $2 trillion offshore for tax purposes, with just 30 companies accounting for 65 percent of the total, or $1.35 trillion. The report, “Offshore Shell Games,” released today by MASSPIRG Education Fund and Citizens for Tax Justice Tax, found that loopholes encouraged more than 72 percent of Fortune 500 companies – including 8 companies headquartered in Massachusetts – to maintain subsidiaries in offshore tax havens as of 2014.

Everyone should play by the same set of rules. The rest of us don’t hide our money in the Cayman Islands or another tax haven. We pay our fair share. And even as Congress continues to allow this continue, Massachusetts lawmakers have an opportunity to act.

“Small businesses already face plenty of challenges, we should not ask them to compete in a rigged marketplace favoring a few corporate giants that can afford to exploit our tax code in this manner,” said Representative Josh Cutler (Duxbury), Chief House sponsor of An Act closing a corporate tax haven loophole, HB 2477 and SD 1699 to prevent some of the tax haven abuses. “Let’s promote innovation and creativity in the marketplace, not in our tax code.”

Every year, offshore tax loopholes used by U.S. corporations cost Massachusetts $600 million in state tax revenue. And while most of the reforms needed are at the federal level, Massachusetts lawmakers are considering An Act closing a corporate tax haven loophole which would restore $79 million annually to the state budget and help lead the way for national reform. The measure has earned 57 bipartisan cosponsors.

“When corporations dodge their taxes, the public ends up paying,” said Deirdre Cummings of the MASSPIRG Education Fund, who released the report today. “The American multinationals that take advantage of tax havens use Massachusetts roads, benefit from our education system and large consumer market, and enjoy the security we have here, but are ultimately taking a free ride at the expense of other taxpayers.”

Key findings of the report include:

The 8 companies headquartered in Massachusetts maintain at least 237 tax haven subsidiaries holding $38.5 billion in profits offshore.

MA_Companies with tax havens

–    At least 358 Fortune 500 companies operate subsidiaries in tax haven jurisdictions, as of 2014. All told, these companies maintain at least 7,622 tax haven subsidiaries. The 30 companies with the most money booked offshore for tax purposes collectively operate 1,225 tax haven subsidiaries.

–    Bermuda and Cayman Islands remain the most popular tax haven jurisdictions. About 60 percent of companies with any tax haven subsidiaries registered at least one in Bermuda or the Cayman Islands.

–    The reported earnings of these Cayman Islands subsidiaries is not just implausible, it’s impossible. American multinationals collectively claim that earned profits in Bermuda and the Cayman Islands equal to 1,643 percent and 1,600 percent respectively of each country’s entire GDP or yearly economic output.

–    Only 57 companies disclose the amount they would expect to pay in U.S. taxes if they didn’t report profits offshore for tax purposes. All told, these 57 companies would collectively owe $184.4 billion in additional federal taxes, equal to the entire state budgets of California, Virginia, and Indiana combined. The average tax rate the 56 companies currently pay to other countries on this income is a mere 6.3 percent, implying that most of it is booked to tax havens.

Companies that were highlighted by the study include:

–    Walmart publicly reported operating zero tax haven subsidiaries in 2014 and for the past decade. Despite this lack of reporting, over the past decade Walmart’s accumulated offshore profits have grown from $6.8 billion in 2005 to $23.3 billion in 2014, and in reality the corporation operates 75 tax haven subsidiaries.

–    American Express officially reports $9.7 billion offshore for tax purposes on which it would otherwise owe $3 billion in U.S. taxes. That implies that American Express currently pays only a 4 percent tax rate on its offshore profits to foreign governments, suggesting that most of the money is booked in tax havens levying little to no tax. American Express maintains 23 subsidiaries in offshore tax havens.

–    Pfizer, the world’s largest drug maker, operates 151 subsidiaries in tax havens and officially holds $74 billion in profits offshore for tax purposes, the fourth highest among the Fortune 500.

The report concludes that to end tax haven abuse, Congress should end incentives for companies to shift profits offshore, close the most egregious offshore loopholes, and increase transparency.

“Offshore Shell Games” is available for download at:


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This entry was posted on October 6, 2015 by in Tax and Budget.
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