Too many secrets: 100 corporations and the 10,000 ways they hide their money

Activists outside the offices of Chevron in Houston, Texas called for oil companies to accept strong rules to implement the transparency provisions in the Dodd-Frank Wall Street Reform Bill in 2012. Oxfam members portrayed oil companies as monkeys in the “see no evil, speak no evil” proverb. Photo: Scott Dalton / Oxfam America

It’s developing countries that take the brunt of tax avoidance by US and UK companies.

Robbie Silverman is a Business and Markets Advisor at Oxfam America.

Do you want to know a secret? Huge multi-national corporations hope that you don’t, but here it is:

Great Britain’s top 100 companies own 30,000 subsidiary corporations—300 for every company. And according to a new report by Christian Aid, 10,000 of these subsidiaries are located in tax havens, that is, jurisdictions that let corporations get away with almost no reporting. There’s no way to make sure that these huge companies are paying their fair share of taxes.

Companies use subsidiaries like secret bank accounts. They form corporations in jurisdictions with weak tax laws, stash their money in these tax havens, and keep it secret from the public. This secrecy allows companies to lower their tax bill without anyone knowing about it, including tax-paying citizens who play by the rules.

The US is no better than the UK

US companies use the same trickery to hide their money and lower their tax bills. Apple, Google, Starbucks, and Microsoft are just a few of the US companies charged with using secret off-shore accounts to avoid paying taxes.

Earlier this year, Citizens for Tax Justice released a report examining the tax bills of Fortune 500 companies over the past five years. Despite earning profits every single year, 26 corporations didn’t pay a single penny in federal income taxes for all five years. These corporations—including Boeing, GE, Verizon, and Priceline—earned $170 billion but paid nothing in taxes. More than 100—including Goldman Sachs, Facebook, Exxon Mobil, and Wells Fargo—didn’t pay any taxes for at least one year, despite consistent profits.

Banks and oil companies hiding the most

According to the Christian Aid report, 98 of the top 100 companies on the London Stock Exchange have a subsidiary in a tax haven. Big banks are particularly egregious. The five banks that Christian Aid analyzed have more than 5,000 subsidiaries, with 1,500 subsidiaries that report absolutely no information at all. This means five banks control an average of 300 secret accounts each, black boxes totally closed to scrutiny.

Mining and oil and gas companies aren’t much better. Nearly two-thirds of their 3,500 subsidiaries are in tax havens, and two-thirds of those do not report any information—pitch-black mine shafts hiding secret gold.

What to do? Better reporting, fewer secrets

Christian Aid calls for country-by-country reporting—requiring corporations to report profits where they were actually earned, rather than where they were stashed—as a way to combat the use of tax havens. Developing countries—often hardest-hit by corporate tax avoidance—must be included in the conversation, as Oxfam called for it in its recent report on corporate tax reform, Business Among Friends.

When companies don’t pay their fair share of taxes, everyone else feels the pain. Too many secrets hurt.